Goldman Sachs Group Inc. has made Japan’s leading taxi-hailing provider, Go Inc., a unicorn with its biggest startup investment in the country.

Tokyo-based Go was valued at ¥135 billion ($1 billion) in its latest fundraising round, which will bankroll aggressive acquisition forays and an initial public offering in the near future, according to President Hiroshi Nakajima.

The taxi app operator landed ¥10 billion from the Wall Street titan after pitching itself directly to financial institutions. It also secured a ¥3 billion loan line from MUFG Bank Ltd. as well as a ¥1 billion line of credit from Sumitomo Mitsui Trust Bank Ltd.

Goldman began investing in global startups from a dedicated vehicle in 2022, and Go marks its biggest outlay in Japan under that initiative. It bumped Go’s valuation up by 5% from its previous funding round two years ago.

“We wanted to strengthen our arsenal for new business initiatives and diversify our stakeholders by inviting non-Japanese financial players as we target an IPO within the next few years,” Nakajima said in an interview.

Go launched its hailing app in 2020 and quickly became the most-used platform in Japan. It had good pedigree, with 45-year-old Nakajima having previously steered online portal DeNA Co.’s taxi-ordering app. It also benefited from the country’s ban on the free-for-all ride-hailing model, championed by Uber Technologies Inc., where anyone can start charging for rides, even without a taxi license. Instead, Nakajima worked closely with the existing taxi companies — and layered on booking and pickup fees to expand revenue overall.

Now commanding 70% of the domestic market, according to Nakajima, Go has outpaced Uber, Didi Global Inc. and even Sony Group Corp., which operates a joint venture named S.Ride.

“Thanks to the law here, the market is well protected and we don’t need to sacrifice revenue to keep market share,” Go’s president said.

The firm sells itself as an aid for drivers to make more money rather than a threat. Its relationship with taxi companies and drivers is key, as having a big roster helps it rapidly respond to app users. Go uses artificial intelligence to suggest routes that will maximize the chance of picking up a passenger. It also helps with updates on roadworks and safer-driving navigation tips. Half of the firm’s revenue comes from its business partners.

Go’s app has been downloaded more than 14 million times, and its revenue is expected to grow 70% to ¥18 billion in the fiscal year ending this month.

“Our goal is to make Go the easiest method to catch a taxi for any customers in Japan and the most reliable partner for drivers to earn more revenue,” Nakajima said.

The company has yet to break even, as it spends aggressively on advertising to pull in more customers. Go can turn a profit immediately if it felt the need, Nakajima said, by downscaling its recruitment campaigns. But its stakeholders, including Goldman, are backing Go’s full-throttle marketing strategy.

“Mobility is an integral part of our everyday life, and Go is well-positioned to lead digitalization and innovation of Japan’s taxi market,” said Stephanie Hui, global co-head of growth equity at Goldman Sachs.

Japan, where cash is still king, lags other developed countries in the adoption of digital payments and services. Most other nations already have incumbent mobility platforms — like Uber, Didi or Lyft Inc. — putting a cap on Go’s expansion potential beyond the home market. Go has no interest in overseas expansion and Japan alone provides ample room for the company to grow, its chief said.

“If you look around the world, there’s no doubt that the Japanese mobility market, where only 10% of our business partners’ rides are made through the app, would eventually get fully digitalized,” he said. “Japan is the last undeveloped market in terms of mobility digitalization, and is big and healthy.”

In addition to boosting marketing spend, the company will use the raised cash on new business initiatives, such as a car-management system to nudge reluctant taxi operators to adopt electric vehicles.

“It’s difficult to persuade taxi companies to decarbonize just for the sake of the environment, and that’s why we are making an AI-driven software platform that will make EVs more profitable for them,” Nakajima said. The platform will help streamline operational issues such as finding charging stations.

Go is actively looking for opportunities in related industries in Japan, such as logistics, which remain largely untouched by digital technology. It’s willing to spend tens of billions of yen for the right deal.

“I know that size is a bit of a stretch for a company like ours, but there are a lot of financial tools that we can leverage,” he said. “Our goal is to become the dominant mobility platform in Japan.”

--With assistance from Takahiko Hyuga.