On July 26th, 2018, we hosted our sixth Japanese Pitch Night with our partners at NEDO Silicon Valley. Held at Galvanize in San Francisco, the event featured five amazing new startups fresh from three weeks of intensive startup boot camps in Japan and the US. We also had the privilege of hearing from a panel of highly-regarded investors, entrepreneurs, and thought leaders on the latest trends and advancements in cross-border M&A.
Highlights from the panel discussion are below. Some comments have been edited for clarity and/or brevity.
- Moderator: Alidad Vakili, K&L Gates
- Jay Onda, Orange Silicon Valley
- Deborah Magid, IBM Venture Capital Group
- Daisuke Minamide, CyberAgent Ventures
- Adam Kell, investor and entrepreneur
Alidad: Is M&A increasing in Japan and the US?
Deborah Magid: Definitely—there are more startups. Toyota has a $100M AI fund—there’s money to be had now, and that wasn’t necessarily true in the past. There was a record $2.5B spent on startups in Japan in 2015, with corporate ventures at an all-time high.
Daisuke Minamide: M&A inside of Japan is increasing, as well.
Adam Kell: There’s been a lot of data that support the idea that Fortune 500 companies have been monetarily decreasing over time. Technology is compounding, and changing the way things are done—and new companies are coming in. There will always be crashes, booms, and busts—the M&A market is pretty fickle thing to try to prepare for. At the end of the day, it comes down to serendipity and chance.
Alidad: Are there any particular industries that are attracting M&A?
Deborah: In Japan, there’s a lot of investment in AI, Robotics, and IoT—a lot of this is driven by what the automakers are doing because those technologies are used in manufacturing or driving. People want to develop their products faster and launch them in the market faster.
Daisuke: Many companies want to expand outside of Japan—it’s not always to grow innovative new technologies, but just to expand a business. A large amount of money is poured into acquisitions, and startups want in.
Adam: The startup ecosystem goes through changes—think about Kiva robotics. Their acquisition by Amazon launched at least 20 other robotics company acquisitions.
Alidad: Do you see a lot of bigger companies are going out to find new technology, rather than developing it from within?
Deborah: IBM does a lot of acquisitions—mostly we’re looking for business who can expand what we do so we can serve our customers better. Solid teams, solid technology, people who treat their employees well—that’s what we look for. Japanese startups need to get in front of corporations—not just in Japan, but everywhere. Almost half the acquisitions of Japanese companies come from outside Japan.
Jay Onda: My advice to startups and corporations is this—the way you look at strategic value has to change. Especially business intelligence—a lot of Japanese companies are using older business models while the Airbnbs and Amazons take over the world. If you’re a startup company and you’re hoping to get acquired, you have to make sure your strategy matches the market.
Alidad: What are some of the challenges faced by international startups? How can startups and corporations improve their chances of a successful acquisition?
Deborah: When you acquire a company from a different culture, you have to take into account all the differences in how they operate—everything from staff to the tools they use to their weekly schedule. If you can have dedicated transition managers, you should. Otherwise the acquisition can drag on for months and months.
Alidad: Not factoring in culture can totally derail the success of an acquisition.
Daisuke: Japanese startups come to me to ask how they can be successful in the US. The revenue created in Japan doesn’t make the same sense in the States. You have to create an abstract result in the states before you go to investors.
Alidad: What’s the best advice for startups hoping to get acquired?
Jay: First-time entrepreneurs don’t realize that building an IPO is just one step in your startup journey. Something to think about as you go forward.
Deborah: Startups also have to think about this: how passionate are you about being inside a large company like IBM? You have to want to be there, or else it won’t work.
Jay: Getting acquired is basically like getting adopted, except you get to choose your parents. Make sure you’re syncing up with a company you’re prepared to be extremely close to!
Adam: Startups tend to have bigger eyes than their stomachs. Do your best to stay focused, and don’t get trapped in the idea that you’re looking for the golden ticket—if you’re a startup and customers are giving you money for a service, don’t underestimate the number of pieces that had to work in order for you to get there.
Jay: That’s a global thing—people around the world read TechCrunch articles and think they’ll come here and raise money on their second day in. You’re already at a disadvantage when you’re not part of the local ecosystem. Investors are usually contractually unable to invest in overseas startups! Remember: fundraising is difficult for local startups—global startups have a steeper version of an already steep climb.
Alidad: It’s like with most things: you want to be successful, you have to do your homework.
The pitching companies then took the stage to showcase their amazing innovations:
16Lab is a firmware developer for IoT/Wearable developers with strengths in highly accurate 3D motion analysis technology, ultra-low power consumption technology, and patented authentication technology that prevents device hacking. 16Lab clients include global entertainment companies, smart home device developers, and mobility providers. www.16lab.net
Tsukuba Technology is a leading developer of inspection technology for the utility, aerospace, automotive and oil & gas markets. The company developed the world’s first “Laser Ultrasonic Visualizing Inspector (LUVI)”, which quickly investigates inner defects of welds and large jointing materials including CFRP (Carbon Fiber Reinforced Plastic). www.tsukubatech.co.jp
edison.ai image recognition technology scans images, including social media posts, to identify products, interests, activities, and locations. We provide marketers with psychographic analytics about their audience, consumers or fans so they can optimize brand partnerships, influencer campaigns, and ad spending. Recent clients include consumer products, bands, and food and beverage brands. www.edison.ai
Indent Probe Technology Inc. provides measurement services that determines the mechanical properties of various composites, quickly and accurately. We offer multiple dynamic measurement results to EV manufacturers and their suppliers including the mechanical properties of high-temperature solder, evaluation of viscoelastic properties of automotive resin, and degradation and mechanical characteristic changes due to fatigue. Our value proposition is fast, accurate data and that also helps enhance the business process. www.indentpt.com
Cinnamon Inc. is an Enterprise AI company which provides an AI document reader for the financial services industry. The reader automates data extraction from unstructured documents, such as invoices and contracts, and transfers this to a structured database. Current clients include insurance companies, logistics suppliers, banks and leasing companies. www.cinnamon.is
Special thanks to our partner NEDO for an amazing event!