Publication date: April 15, 2024
Government Publishes Guidebook for Green Startups
On March 29, the Ministry of Economy, Trade and Industry (METI) put together a 119-page guidebook for startups that will contribute toward decarbonization, strengthen industrial competitiveness, and support Japan’s overall economic growth.
So far in Japan, much of GX Policy has been led by and geared toward large, long-standing energy and engineering companies. The government recognizes that to meet its emissions reduction targets, new players must contribute to the development of technologies that have not yet reached commercialization. A major barrier to market entry for new players is the difficulty they face in accessing sufficient funding during the middle phase of their growth trajectory.
Overcoming Financial Hurdles for Green Startups
METI explains that these “Green Transformation(GX) startups” in Japan are fewer and smaller compared to other countries, owing to the sluggish growth of debt financing and convertibles as financing mechanisms.
To address these roadblocks, the guidebook walks readers through how to use Letters of Intent (LOIs) and offtake agreements as non-legally binding instruments for startups to obtain fundraising from larger companies. It further shows how GX startups can tap into financing channels, detailing the pros and cons of debt financing from financial institutions versus traditional equity financing. Interested readers can find the guidebook and the accompanying webinar that was held on March 25 (all in Japanese) on METI’s website.
This guidebook may prove to be a valuable resource for green startupsin Japan, but alone it will probably be insufficient for most companies to navigate their way to necessary financing.
Many other resources, such as sector- and technology-specific guidebooks and workshops, accelerator programs, and incubators that bring together startups, investors, large companies, and policymakers, will no doubt be necessary to create a vibrant GX startup ecosystem.
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