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Digitimes Research: Japan new fund raising policy to provide positive benefit to crowd funding market
Hana Hu, DIGITIMES Research, Taipei

Following the passing of Japan's 2014 amendment of financial instruments and exchange act, etc. on May 23, 2014, unlisted companies in Japan are now allowed to raise funds through the Internet and the move is expected to prompt Japan's crowd funding platforms to include investment projects, which is expected to help expand the related market.

The success of smartwatch Pebble prompted many entrepreneurs to try crowd funding platforms. The platforms not only provide entrepreneurs a chance to expand their businesses internationally, they also help the market to develop actively. US-based research firm Massolution found that crowd funding platforms worldwide together raised US$2.66 billion in 2012, up 81% on year with most projects located in North America and Kickstarter being the largest. Such a trend has also started occurring in Japan.

Japan's crowd funding platforms started operating after the earthquake on March 11, 2011 as non-profit organizations used the platforms to help raise funds for rebuilding.

But since IT products usually involve complicated R&D, manufacturing and launch processes, which is then amplified by the lack of experience of the creators, a common trend of many projects has been that backers become dissatisfied by the end of the process due to changed specifications, missing features, or huge delays between when the products was originally scheduled for delivery at the time they pledged their money and when the product actually shipped. Therefore most projects on Japan's crowd funding platforms have been non-IT products, and those successful at raising funding have been mostly enterprises and schools. Some well-known vendors have even created projects motivated to advertise and increase awareness of upcoming products, rather than raise cash.

Compared to the US, Japan lacks IT-related entrepreneurs and Japan's large IT vendors also only place limited investment on entrepreneurs. Although many IT companies such as Internet service players and telecom carriers have budgeted corporate venture capital to for emerging companies, the emerging companies are mostly unable to benefit due to the long application and approval process.

Because crowd funding platforms offer high flexibility and low thresholds to entry, as well as the Japan government's new policies, Digitimes Research expects the platforms to become an attractive fund raising channel for Japan's entrepreneurs.

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