Tokyo, Aug 27: Japan’s startup and private-equity market is set for a potential shift as Smartround Securities moves towards providing secondary-market services for shares of unlisted companies, creating a new route for investors and early shareholders to buy or sell stakes before a company reaches the public market.
The company completed registration on August 21 as a Type I financial instruments business under Japan’s special framework for intermediary services involving unlisted securities. It plans to begin secondary trading services after completing membership-related procedures with the Japan Securities Dealers Association.
The development is significant for Japan’s business ecosystem because startup investors have traditionally had limited opportunities to realise their investments before an IPO or acquisition. A more organised secondary market could give venture capital funds, early investors, founders and employees greater flexibility to manage their holdings while companies remain privately owned.
For startups, the new mechanism could also change the way companies approach growth and fundraising. If early shareholders have access to liquidity without waiting for a public listing, companies may have more flexibility to remain private for longer and concentrate on expanding their businesses rather than pursuing an IPO prematurely.
The impact could extend to Japan’s broader capital market. Smartround has projected that secondary transactions could become increasingly important as IPOs become larger and the period before listing grows longer. The company has also highlighted potential uses of secondary transactions for strategic shareholder changes, employee stock-option liquidity and investment by later-stage investors.
A stronger private-share market could also help create a more active cycle of capital. When early investors are able to exit partially or fully, the capital they recover can potentially be redirected into new startups and other growth opportunities.
For employees and founders, liquidity in private-company shares could provide another way to benefit from the value created during years of business growth. This may also help startups attract and retain talent by giving employees a clearer potential path to realise the value of stock options.
The development comes as Japan works to strengthen its startup ecosystem and improve the flow of capital to high-growth businesses. Smartround says its broader platform is already used by more than 7,500 startups and 4,600 investors, while its securities business is being developed specifically to support a more active market for unlisted shares.
However, the expansion of private-share trading will also require careful attention to valuation, disclosure and investor protection. Unlike listed companies, private businesses generally provide less public information, making accurate pricing and transparent transactions particularly important. The emerging market is intended for specified investors and should not be viewed as equivalent to ordinary retail stock-market trading.
For Japan’s business and investment landscape, the move represents more than the launch of another financial service. It could help build a bridge between startup funding, private-market liquidity and future IPOs, giving growing companies and their investors more choices as they move through different stages of the business lifecycle.
If the market develops successfully, Japan could see a more flexible startup financing environment in which companies can raise capital, provide liquidity to existing shareholders and pursue public listings when they are better prepared for the demands of the stock market.