Changing Japanese companies or rapidly increasing CVC January 27 16:48

With new technologies and business models appearing one after another, can we win with our own development? Now that the speed of competition is accelerating, it is indispensable to incorporate excellent technologies and ideas from other companies. “CVC = Corporate Venture Capital” is backing this trend. An operating company invests in a startup company with its own funds, but rather than investing profits, it aims to create a new core business and search for profits. CVC, which is different from venture capital and M & A, may be a catalyst for changing Japanese companies. (Taichi Soga, International Affairs Reporter)

Featured CVC is on the rise

In the business world, investment by “CVC = Corporate Venture Capital” is increasing. Google's GV, major cloud services, and Salesforce's Salesforce Ventures are known.

CVC is an organization in which a business company invests in a startup company or the like, mainly on its own funds, and often takes the form of a fund, separate from the management of the company itself. However, investment is not aimed at investment profits like venture capital. Through investing in start-up companies, there are various purposes, such as obtaining the latest information on business trends, collaborating, and inviting excellent human resources.

Eventually, there are cases in which acquisitions and the like are aimed at M & A, but since startup companies often fail, sudden acquisitions are risky and take time to make decisions.

In this regard, since CVC is separated from the company itself, investment decisions are quick. Competitive start-ups need fast-paced financing to expand their business. Investors will not be able to get gold eggs and find new revenue seeds if their decisions are late.

According to a report by a US research firm, CVC investment in 2018 was $ 53 billion, or ¥ 5.8 trillion in Japanese yen, a five-fold increase from 2013. Over 80% of the investment is concentrated in North America and China, which are the world leaders in the development of AI = artificial intelligence.

Rough waves of change in the background

Behind the increase in investment by CVC are major changes in business models. New companies, such as Uber, a ride-sharing app that enters the global taxi industry, and AirBnB, a private lodging agency, often force existing industries to change.

Yasumasa Yamamoto, who advises Silicon Valley venture capital, points out that Japanese companies have a bitter experience losing the market because they couldn't keep up. Mr. Yamamoto is also a visiting researcher at prestigious Harvard University.

"Even though Japan made a very good product called garake, it could not be sold in the world because" what consumers want "and" what manufacturers can " Consumers weren't really looking for pixel counts, one-segment features, battery life and waterproofing, but they wanted something that was easier to use and could use new apps and services. I was defeated and my smartphone got seated. ''

Mr. Yamamoto says that Japanese companies are required to invest in CVC, and that movement is starting to be active now.

Yasumasa Yamamoto: "What Japanese companies are most looking for is how their main business will change. Investing in startups in Silicon Valley in a situation where you do not know when and where your main business will be eroded We aim to acquire new technologies and talent, rather than return on investment, with the goal of working, hopefully collaborating and acquiring. ''

The Japanese government is also supporting the investment of start-up companies, etc. nationwide, and the Ministry of Economy, Trade and Industry said, "Toyota has set up a 10 billion yen CVC to become a so-called" flying taxi "startup company. Increasingly, companies are becoming more conscious of incorporating other companies' technologies, such as investing in their own developments. "

Japanese executives also study

Against this background, CVC investment among Japanese companies is increasing rapidly. The amount of CVC investment by Japanese companies in 2018 has increased to about 10.9 billion yen, almost 10 times in 10 years. But it's still only a fraction of the size of global investment.

In order to overcome this situation, executives of Japanese companies participate in seminars organized by Mr. Yamamoto and researchers at Stanford University in Silicon Valley etc. to learn about CVC investment and how to identify startup companies. It is said that the number of cases to do is increasing.

Yasumasa Yamamoto "After the Lehman Shock, all industries have become indifferent to data science and IT, and have begun to enter Silicon Valley, while changing business models and identifying truly successful startups. I don't think you can understand the point.This is a feeling that it is difficult to obtain if you do not actually see a business model at a startup company.A few case studies of successful cases where startup companies and large companies have joined together Then you can think of it as "this pattern may be effective for your company". "

What is needed most now in the wave of rapid change? Yamamoto says:

Mr. Yasumasa Yamamoto: "There are still many people who can't imagine what is going to happen in the next 10 years. Many people think about one thing like" how about blockchain "or" what about 5G "in trendy words. However, in the real world, 5G, blockchain, and AI are moving in a complex way, and even if it is obscured, it is a person who can understand and judge everything as "that means this kind of thing" I think that is what is needed now. ''

What governs the times

The words "What is going on 10 years ahead" felt very heavy. Unlike US companies, Japanese companies, whose relocations change every few years and whose staff often changes, are unlikely to be responsible for their business in the next ten years. Even in a Japanese company, even a CVC representative sent to Silicon Valley can change in just a few years.

Nevertheless, the evidence that Japanese companies are willing to accept not only in-house development but also other companies' technologies is an increase in CVC.

I would like to pay attention to how such positive movements lead to innovation, and Japanese technologies and services will be accepted by the world.

Taichi Soga, International Affairs Department Reporter Joined Sapporo Bureau in 2012 and studied digital technology as a visiting researcher at Stanford University, International Affairs Department.