The Japanese government bet $93 million on a "dream material" born from spider silk. The company behind it booked $2.8 million in revenue and a $200 million net loss. That single investment has now brought down Japan's flagship public-private fund.

What Was the Cool Japan Fund?

In November 2013, under Prime Minister Shinzo Abe's growth strategy, Japan launched an ambitious public-private investment fund called the "Cool Japan Fund" (officially the Fund for Overseas Demand Development Support Organization). Its mission: to monetize Japan's cultural "cool", anime, games, food, fashion, by providing risk capital to businesses that could sell Japanese culture overseas.

Over 12 years, the fund invested approximately ¥142.6 billion ($950 million) across 62 projects. As of March 2026 its paid-in capital stood at ¥151.3 billion, of which ¥140.6 billion came from the government. It was meant to be seed money that would pull in private capital; in practice, the 24 private companies contributed about ¥10.7 billion ($71 million) and the state carried the rest.

The results were bad. Cumulative losses reached ¥38.3 billion ($255 million) at the end of fiscal 2024, and the fund had already missed its improvement targets twice. Under Japanese government rules, a third miss triggers formal discussions about dissolution or merger.

The pitch that struck it out was Spiber, the fund's single largest investment.

Spiber: The Unicorn Spun from Spider Silk

Spiber was founded in 2007 by Kazuhide Sekiyama, a researcher at Keio University's graduate school who had been studying artificial spider silk synthesis. Based in the small city of Tsuruoka, Yamagata Prefecture, the company developed "Brewed Protein", a revolutionary material made through microbial fermentation using plant-based raw materials.

The concept was brilliant: spider silk is five times stronger than steel with remarkable elasticity. Spiber's technology could replicate these properties without using any petroleum, creating fibers and plastic alternatives from renewable sources. It was the "dream material" for a sustainability-conscious world.

The product attracted real interest. British luxury brand Burberry used Brewed Protein in scarves. Japanese outdoor brand Goldwin co-developed a high-performance jacket called the "Moon Parka." Spiber's valuation surpassed $670 million, earning unicorn status and becoming one of Japan's most celebrated startups.

The Cool Japan Fund invested ¥3 billion ($20 million) in 2018, then added ¥11 billion ($73 million) in 2021 alongside the Carlyle Group. The total ¥14 billion ($93 million) investment became the fund's largest single bet, justified as supporting Japan's fashion and lifestyle exports through a "materials revolution."

The Dream Unravels

Reality proved far less kind than the vision.

Spiber's fiscal year 2024 results were devastating. Operating revenue was just ¥414 million ($2.8 million), while operating losses reached ¥4.89 billion ($32 million). Worse, a write-down of ¥28 billion ($186 million) on its under-construction U.S. factory pushed the net loss to ¥29.5 billion ($200 million).

The company's financial statements included a "going concern" note, a formal warning from auditors (PwC Japan) that the company's ability to continue operations is in serious doubt. This is essentially a corporate "critical condition" notice.

The core problem was the collapse of its U.S. production plan. In 2021, Spiber had partnered with grain major ADM to begin production by 2023 at a facility in Illinois. But the weak yen and U.S. inflation caused investment costs to balloon to roughly three times the original estimate. The company was forced to dramatically scale back production plans.

Adding to the crisis, ¥36.2 billion ($240 million) in loans came due in December 2025. According to reporting from Toyo Keizai, Spiber's banking consortium was discussing an 80% debt haircut, meaning creditors would recover a fifth of what they were owed. In December 2025, support from Maya Kawana, the eldest daughter of SoftBank founder Masayoshi Son, was announced. On April 1, 2026, following a transfer of the business, Kawana became CEO of the restructured company. The old Spiber, balance-sheet insolvent, entered a private workout and is expected to be wound up through special liquidation.

The Fatal Blow to Cool Japan Fund

Spiber's crisis strikes at the heart of the Cool Japan Fund.

The fund's roughly ¥14 billion investment in Spiber is likely to be a total loss.

The result landed on June 24, 2026. The fund disclosed that cumulative losses had reached ¥54 billion. Its 2022 "minimum investment plan" had set a ¥42.6 billion cumulative loss ceiling for fiscal 2025; it overshot by about ¥16 billion. That was the third miss.

The Ministry of Economy, Trade and Industry, which oversees the fund, is convening an expert panel and weighing consolidation or abolition. Economy Minister Ryosei Akazawa said at a June 16 press conference that if the targets were missed, a panel would be set up to decide what to do. One mid-ranking ruling-party lawmaker put it more bluntly: the fund is dragging down Japan's Cool Japan strategy, and abolition is the only option.

Worth noting: the three-strikes rule was written in 2018, and the fund missed twice, in fiscal 2020 and 2021, without anything happening. This is the first time the rule has actually moved.

A Pattern of Failure

Spiber wasn't an isolated mistake. The Cool Japan Fund's track record reveals systemic problems.

Of 17 investments that have been fully exited, the fund invested ¥26.1 billion but recovered only ¥15.6 billion, a loss of approximately ¥10.4 billion ($70 million). Failed projects include a joint department store venture in Malaysia with Isetan Mitsukoshi, Japanese tea cafes in the United States (where the operators didn't even have proper licensing for indoor dining), and WakuWaku Japan, a satellite TV channel that hemorrhaged money while broadcasting Japanese content to Asian audiences.

Governance issues plagued the organization. The first CEO, Nobuyuki Ota, a former fashion executive with Issey Miyake, openly admitted he had "no knowledge about anime and pop culture", despite these being core areas of Japan's cultural appeal. Investment decisions were influenced by personal connections rather than rigorous analysis. In 2017, senior male employees were accused of sexual harassment, leading staff to form a labor union.

Operating costs were also excessive. The fund kept its headquarters in Roppongi Hills, one of Tokyo's most expensive addresses. According to METI's testimony in the Diet, ¥23.8 billion of the ¥38.3 billion cumulative loss at the end of fiscal 2024, over 60%, was not investment losses at all but personnel costs, taxes, and other running expenses. More money went into maintaining the organization that made the investments than into the investments that failed.

Perhaps most fundamentally, the concept of "Cool Japan" was itself unstable. Japan's anime, games, and food culture are genuinely popular worldwide, but that popularity was built by private companies through market competition, not by government mandate. Cool cannot be manufactured by decree, and a fund whose strategy was set without international input was poorly placed to try.

How Other Countries Do It Better

Comparing the Cool Japan Fund to successful sovereign wealth funds reveals what went wrong.

Singapore's Temasek Holdings, founded in 1974, manages approximately $389 billion in assets (2024) and has delivered an annualized return of about 14% since inception. Its success rests on professional investment teams recruited from Goldman Sachs and BlackRock, governance structures that insulate investment decisions from political interference, and a globally diversified portfolio.

Saudi Arabia's Public Investment Fund (PIF) manages approximately $925 billion as the centerpiece of the country's Vision 2030 diversification strategy. While not without controversy, PIF has made bold bets, including a $45 billion commitment to SoftBank's Vision Fund, and has successfully developed entertainment and sports industries in the Middle East.

Israel's Yozma Program, launched in 1993, is perhaps the most relevant comparison. Rather than making direct investments, Yozma created a fund-of-funds structure that invested alongside private venture capital firms, with built-in buyout options that allowed VCs to eventually take full ownership. The program catalyzed Israel's transformation into "Startup Nation."

The Cool Japan Fund's critical weakness was the absence of both professional expertise and political independence. Its investment decisions were constrained by bureaucratic processes, its mandate awkwardly straddled cultural diplomacy and financial returns, and its leadership lacked the venture capital experience needed to evaluate high-risk technology bets like Spiber.

Japan's Startup Ecosystem: Progress and Persistent Gaps

The Spiber saga reflects broader challenges in Japan's startup landscape.

As of late 2024, the world had approximately 1,250 unicorn companies. Japan had just eight. The government's 2022 target of creating 100 unicorns and 100,000 startups within five years has seen startup numbers rise to about 25,000, but the unicorn count remains far from target.

Venture capital investment has been growing, $3.37 billion was raised in the first half of 2025 alone, up 17.5% year-over-year, but this is a fraction of what flows into U.S. or Chinese startups. Per capita, Europe has 4.3 times more unicorns than Japan.

The structural issues are well-documented. Japan's exit landscape is overwhelmingly tilted toward IPOs (76% of exits) rather than acquisitions (90% in the United States). But many of these IPOs are small-scale listings that fail to provide sufficient growth capital. Japanese startups also tend to remain domestically focused, struggling to scale globally.

Yet there are genuine signs of progress. AI startup Sakana AI achieved unicorn status faster than any Japanese company in history, attracting investment from Silicon Valley heavyweights like New Enterprise Associates and Khosla Ventures. Global firms including General Atlantic, KKR, and Ontario Teachers' Pension Plan have made direct investments in Japanese startups. The Japan Investment Corporation (JIC) has made 49 investments in VC funds since 2020, and government programs like J-StarX are sending entrepreneurs abroad for hands-on experience in global ecosystems.

Lessons from a ¥54 Billion Mistake

The Cool Japan Fund's failure doesn't prove that governments should never invest in startups. Temasek and Yozma demonstrate that public capital can catalyze innovation when deployed intelligently.

The specific lessons are clear: insulate investment decisions from political influence; hire professionals with actual venture investment experience; set clear, measurable performance metrics; and resist the temptation to conflate industrial policy with financial returns. Most importantly, don't use the prestige of "national strategy" to justify bets that no private investor would make.

Spiber's technology remains promising. The adoption of Brewed Protein by Burberry and Goldwin was real validation for a post-petroleum materials business. The failure wasn't in the science. It was in the scaling strategy and in the absence of rigorous financial oversight from both the company and its government backers.

In Japan, the phrase "kanmin renkei" (public-private partnership) sounds noble. Too often it becomes a mechanism where the government avoids accountability and the private sector avoids market discipline. Twelve years and ¥54 billion is the tuition.

How does your country's government support startups and creative industries?

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