PE jumps on Japan’s HR tech boom

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For many in the West, there’s a stereotype that Japan is living in the future already.

I was definitely guilty of holding this line of thought myself, as thinking of Tokyo would conjure images of bright neon lights, robots, and other trappings of a sci-fi world. However, this idea was shattered by something I learned while working at an IT outsourcing firm a few years ago.

The development team at that company told me that whenever they built websites for Japanese companies, they had to ensure that those sites would run properly on Internet Explorer and on iPhone 4. Much to my amazement, lots of customers in Japan were still using tech that was already pretty outdated at the time

Stereotypes aside, I wasn’t surprised when I read in today’s featured story that private equity firms see a big opportunity in restructuring Japan’s fragmented HR tech market. Though there are still risks to navigate, investors are looking to consolidate specialized providers and create more comprehensive solutions.

Today we look at:

• Why PE is betting big on HR tech in Japan
• Why Aspire is lending a hand to early-stage startups
• Other newsy highlights such as Qiming Venture Partners’ plan to raise US$800 million and Danantara Indonesia’s newly formed advisory team

Premium summary

PE meets HR in JP

Image credit: Timmy Loen

Private equity (PE) firms have recently made a string of acquisitions in Japan’s HR tech sector.

Casey Abel, an HR tech entrepreneur based in the country, breaks down why this is happening and what the risks are for investors and operators alike.

• Pull factors: Japan’s low interest rates, market restructuring, and increased focus on governance and compliance are among the factors driving PE interest in HR tech. Japanese boardrooms are also paying more attention to talent management now than they did before.
• Fragmentation: The country’s HR tech market is expected to grow steadily over the next few years, but it is still a fragmented sector. Whereas HR tech firms in Western markets provide comprehensive solutions, Japan has specialized providers.
• Challenges: Taking advantage of the capital from PE firms could prove tricky for the sector, with fierce competition among well-funded players sparking a “race to the bottom” for market share. In addition, the entry of global firms poses a threat to local incumbents.

Read more: Why are private equity firms betting big on HR tech in Japan?

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