Japan is known as the easiest stock market for startups to go public. A startup less than $10M revenue can do IPO. I’ve been hearing a lot of criticisms saying Japanese startups are going for public too soon and they are all aiming for small IPO. This is why Japan does not have unicorns as much as U.S.
The question is: “Is small IPO a bad thing?” The answer is: “I don’t think so.”
In Japan, there has been almost 400 companies that went public in the last 5 years. The majority of them were not unicorns and the mean value for company valuation is somewhere between $150M and $200M at the time they did IPO. But there are a countless number of companies whose valuation went up to $1B after IPO.
In my opinion, IPO should be considered as another financing round to startups. Japanese startups treat IPO as something following the previous financing round whereas American startups treat it a bit differently. It’s just a difference between raising money from VCs and doing the same from ordinary people.
This explains why a secondary market like SecondMarket and SharesPost exists in United States. A secondary market is the only way for American startups to provide liquidity for their employees and other stockholders before IPO since a bar for going public is way too high as compared to Japan. On the other hand, in Japan we simply do small IPO, achieve the same liquidity and then become unicorn using the money raised from public market. This isn’t exactly a bad thing for founders, employees and VCs wanting some liquidity early on.
We as Japanese startups need to take this advantage and should not be biased by the thoughts brought from the market where definition of IPO is completely different.