Japanese artificial intelligence startup Sakana AI Co. Ltd. revealed early today that it has raised 20 billion yen ($135 million) in new funding on a 400 billion yen ($2.635 billion) valuation to accelerate its research and development, scale up its applied AI business in Japan, and build a sustainable ecosystem.

Founded in 2023 by former Google Brain researchers, Sakana AI is focused on developing efficient, biologically inspired AI systems that differ from the brute-force, scale-driven approaches used by the largest U.S. and Chinese labs.

Sakana AI pitches itself as a frontier-research organization first, aiming to build AI that adapts and improves in ways closer to natural systems. The company’s AI research centers on “self-evolving” and “model-merging” techniques that allow smaller models to synthesize capabilities, transfer knowledge and recombine skills without requiring enormous training runs.

The model’s design includes automated architectural search and mechanisms that allow AI systems to improve continuously instead of being retrained in large batches. The idea is to reduce computation costs while pushing overall performance in more flexible ways.

The company is focused on building AI models tailored to Japan’s linguistic, cultural and commercial environment, including Japanese-optimized foundation models for enterprises, finance, manufacturing and government clients who require high accuracy in local language, regulatory alignment and sector-specific tuning.

“For Japan, with a declining workforce and an aging population, the benefits of AI technology are clear,” the company said in a post announcing the funding round. “We believe the right path for Japan, a nation with limited resources, is to develop our AI ecosystem sustainably through innovation and collaboration, with a strong focus on societal implementation of the technology.”

The company is also working on creating an AI ecosystem that blends foundational research with real-world deployment to deliver tools and pipelines for organizations to integrate AI safely into existing systems. The architecture is specifically designed to allow enterprises to adopt advanced AI capabilities without the operational burden usually associated with frontier-scale models.

The Series B round included participation from Mitsubishi UFJ Financial Group Inc., Khosla Ventures, Factorial Energy Inc., Macquarie Capital Ltd., Fundomo, Mouro Capital LLP, New Enterprise Associates Inc., Geodesic Capital, Lux Capital Management, Ora Global, MPower Partners Fund LP, Shikoku Electric Power Co. Inc. and In-Q-Tel Inc.

“MUFG has recognized Sakana AI’s world-class technological capabilities from the very beginning, and has deepened our collaboration as a partner in AI implementation,” said Hironori Kamezawa, president and group chief executive officer of Mitsubishi UFJ Financial Group. “As a business leader myself, I feel a responsibility to lead the implementation of AI across all Japanese companies. Through this investment, I hope the benefits of AI will extend beyond transforming banking operations to Japan’s diverse industries.”

The new funding takes the total amount raised by Sakana AI to $479 million, according to data from Tracxn.

Image: Sakana AI