UB Ventures’ SaaS Annual Report
UB Ventures SaaS Annual Report has now been published in English.
Overview of the Japanese SaaS Market
- Maturity: SaaS is now an established industry in Japan with top listed companies exceeding JPY 30 billion in ARR.
- Valuation: Profitability is a key valuation factor. Companies achieving the Rule of 40% (ARR growth + profit margin > 40%) enjoy higher valuations.
- IPO: Difficult environment with only two IPOs in 2023, both from non-VC backed companies.
- Startup Funding: Overall investment decreased, but median funding per startup increased, especially for serial entrepreneurs.
- ARR Acquisition Efficiency: Profitable companies demonstrate greater efficiency in acquiring new ARR.
Growth Drivers
- Multi-product Offering: Companies are expanding through multiple products in specific domains (e.g., Money Forward, freee).
- Enterprise Sales: More labor-intensive solutions like BPaaS are targeting larger enterprises with higher unit prices.
- M&A: Record number of M&A deals (16 in 2023) driven by multi-product strategies and acquisitions of AI technology.
Vertical SaaS
- Potential: Vertical SaaS shows strong growth potential, particularly in addressing labor shortages and regional economies.
- Challenges: Overcoming regional barriers requires building credibility, fostering local partnerships, and understanding specific regional needs.
- Top Players: Companies like CADDi (manufacturing) and KAKEHASHI (wholesale/retail) lead in valuations and funding.
Innovation in a Depopulating Society
- Urgent Challenge: Japan’s rapidly declining workforce necessitates solutions to increase labor productivity and expand the workforce.
- Key Themes: Tech-driven productivity improvements, reskilling & age tech, foreign worker support, women’s empowerment & well-being tech, HR & payroll infrastructure for wage improvement, sustainable energy & food self-sufficiency
- Startup Opportunities: Numerous startups are emerging to address these challenges across various industries.
UB Ventures’ Focus
- Investing in solutions for a depopulating society: Focusing on startups that improve productivity and/or create new labor sources.
- Supporting entrepreneurs: Providing hands-on support for startups to achieve global success.
Overall
The report highlights a mature yet dynamic SaaS landscape in Japan facing the unique challenge of a declining population. The focus is shifting towards profitability and efficiency while vertical SaaS and innovative solutions tackling societal issues are emerging as major growth opportunities.
Please follow us to read more about Finance & FinTech in Japan, like hundreds of readers do every day. We invite you to also register for our short weekly digest, the “Japan FinTech Observer”, on Medium or on LinkedIn. Our global Finance & FinTech Podcast, “eXponential Finance” is also available through its own LinkedIn newsletter, or via our Podcast Page.
Should you live in Tokyo, or just pass through, please also join our meetup. In any case, our YouTube channel and LinkedIn page are there for you as well.