The Tokyo Consortium for Startup Ecosystem held the "Green x Global Startup 2024 KICKOFF" at Tokyo Innovation Base on June 6, 19. On the day, two sessions were held: "The key to the rapid growth of Japan's first climate tech startup" and "Exploring the behind-the-scenes of Japan's first swing-by IPO." After each session, a Q&A session was held, and a networking event was held after the event.
① Greetings from Mr. Keiichi Yoshimura, Director of the Tokyo Metropolitan Government Startup International Financial City Strategy Office
At the opening of the event, Keiichi Yoshimura, Director of the Tokyo Metropolitan Government Startup International Financial City Strategy Office, gave an opening address to the participants gathered at the venue. He said that the startup strategy formulated last year was a catalyst for great progress in the past year to expand the ecosystem. Specifically, he said that since the opening of Tokyo Innovation Base, more than 130 events have been held, and as of today, June 6th, more than 19 people have used it, and that the SusHi Tech Tokyo Global Conference held at Tokyo Big Sight on May 1th and 4000th, 2024, attracted more than 5 participants, with more than 15 startups from Japan and abroad exhibiting, and more than 16 business negotiations were conducted.
② Yosuke Morimoto from the Tokyo Consortium Secretariat provided an overview of the Tokyo Consortium.
[Speaking companies]
Takaaki Umada, Director of FoundX, University of Tokyo
Nana Hori, CEO of Tensor Energy Inc.
Fermenstation Co., Ltd. Representative Director Rina Sakai
[Moderator]
Yoshiaki Miyazawa, Executive Assistant, Deloitte Tohmatsu Venture Support Co., Ltd.
The panelists were Takaaki Umada, Director of FoundX at the University of Tokyo, Nana Hori, CEO of Tensor Energy Inc., and Rina Sakai, CEO of Fermenstation Inc., and the moderator, Miyazawa, held a discussion. First, the three panelists introduced themselves, and then they discussed three topics. Below are excerpts and summaries.
Miyazawa:What do you think are the challenges facing climate startups as they expand and grow globally?
Mr. Umada (hereafter, titles omitted): First, there are few startups working in climate tech. While this can be an advantage in that there is less competition, it also makes it difficult to accumulate know-how in the field, making it difficult for successful startups to emerge. Because green and climate issues are global issues, the environment is conducive to the birth of global startups, but there is still an issue of insufficient demand in the domestic mother market. This raises the question of what the point of starting a business in Japan is, making it difficult for global startups to emerge from Japan. I think how to create domestic demand will be important for global expansion and growth.
Mr. Sakai (hereafter, titles omitted): I agree with the issue of the small number of startups involved in climate tech, which Mr. Umada pointed out earlier. If there are few startups in Japan, there is no competition. I previously had the opportunity to participate in an overseas program that supports mid-late stage startups in global climate tech, and what I noticed there was that there are a lot of competitors in this field in Europe and the United States, and if Japanese startups in this field do not know about it, they will lose out. In addition, while a huge amount of money is flowing into this field in Europe and the United States, there are few opportunities and demand for fundraising in Japan, so the current situation is that they have no choice but to go overseas. Furthermore, there are few examples to refer to, and there is a small domestic network, so there is little information and they are feeling their way around.
Mr. Hori (hereafter, titles omitted)：What is frustrating for us about going overseas is that Europe has already taken the lead in terms of power systems, so it will be difficult for us to aim for Europe in that field from now on. Even in climate tech, I feel that Japan needs to play a European role, getting heavily involved from the rule-making stage onwards.
Umad: Recently, when a startup I support visited Australia to check out technology trends, they realized that Japanese technology is overwhelmingly stronger. Japanese startups don't go overseas, so they don't realize Japan's strengths. Another issue is that because they don't go overseas, they don't realize that Japan has strengths in manufacturing suppliers.
(I.e.：First of all, I would like SusHi Tech Tokyo to continue. It is a large-scale event, and has connections with ecosystems not only in Japan but also overseas. SusHi Tech Tokyo also has a message that it wants to become a global place for startups, but this will be meaningless if it does not continue in the future. I hope that it will one day become more well-known and become an event that many startups both in Japan and overseas aspire to.
In addition, there are various systems in the city and country to support overseas expansion, but they mainly focus on SaaS and tech. On the other hand, I feel that there are still few systems related to climate tech, so I hope that a system that suits the actual situation will be created.
moat: First of all, I think it would be good if startups could work together with policymakers and large companies in terms of creating rules and systems. Another thing is that up until now, Japanese startups have been involved in peripheral areas that large companies have not touched, but looking at overseas examples, I get the impression that startups that are taking on major areas are growing significantly. It would be particularly helpful in the early stages if you could support them in building a track record rather than just providing capital support. Also, I feel that building a network with local partners is a very appreciated form of support.
Miyazawa:Was there any support that was useful to you from the Tokyo Consortium?
moat: We received a wide range of support for green startups. I remember that it was especially helpful in the early stages of our business, when we had to juggle a variety of tasks at the same time. Also, approaching large companies was a huge challenge, but we received a lot of support in that regard, which helped us gain many leads.
Umad：Unlike the two of you, I am involved in this field entirely as a supporter. What I feel is that the way of providing support is changing. Unlike when we supported IT and other fields in the past, in climate, it is necessary to set a certain target because it costs money to verify hypotheses in the early stages. In this way, supporters need to think about how to support startups that will become unicorns in order to nurture them. There are two specific points of support. The first is a market-based support method. What is interesting about climate tech is that it does not necessarily require the latest technology, and even old technology can be applied to new markets, so support needs to be provided with the current market in mind. The second point is support to create demand. Innovative products will not sell unless the buyer is willing to innovate. Therefore, large companies and governments will be required to create new demand. I believe that support on how to create innovative procurement within Japan will create demand.
Miyazawa:You both are developing technology-based businesses, but what do you think about the market-based support that Mr. Umada mentioned?
moat：We are very grateful for the support in terms of building a track record. If the market itself becomes larger, I think it will have a positive effect not only on startups but on Japan as a whole.
Umad：I think the rule-making that Mr. Hori mentioned earlier is very important. Having a certain degree of regulation creates demand. This will help the industry grow, so the government should support this.
moat：I think it's important to have a system in place that creates economic benefits for solving social issues. So policies that provide incentives are important.
(I.e.：Startups and businesses in general related to the climate tech field are necessary. Creating a circular society is essential for Japan, given its limited resources, and this will be a huge business opportunity. I would like to work with everyone who shares this vision to make this a reality across borders.
moat：Startups are like running with a time bomb. On the other hand, we are people who can take risks, so if you can make good use of us and if you also take a little risk, I think this field will expand even further.
Umad：I believe that not only in the climate field, but in general, startups are expected by society to show ideals and hope. Furthermore, it is important to be positive. I think one of our roles is to show a positive attitude that we can solve climate change and disasters, not just be afraid, and that there are ways to do so, and I think this attitude of startups can also move large companies. I also think that this climate field is a field where we can make a final decision after developing the startup ecosystem over the past 10 years. It must be global, and the role of governments and large companies is also a major area. It is also necessary for universities to gather technologies from various universities, not just one university, and tailor a business. Therefore, I think that the climate field plays a role that will be greatly expected of the startup ecosystem. I would like to continue working with various people in the future.
Q:"What kind of fundraising strategy are they adopting when the domestic market is not booming?"
A. Sakai:"We just finished it relatively recently. We're looking to retain domestic investors who are looking to invest in the impact sector, climate change sector, and global expansion."
A. Hori:"We've heard people from Silicon Valley tell us that we should leave Japan, but we want to hang on in Japan for a little longer."
[Speaking companies】
Masanao Matsumoto, General Partner and Co-Founder, WiL Inc.
Professor Akira Iriyama, Waseda Business School, Waseda University Graduate School
Tomoko Igarashi, Director and Chief Financial Officer, Soracom Inc.
[Moderator]
Yuko Kanazawa, Executive Assistant, Deloitte Tohmatsu Venture Support Co., Ltd.
The special guests were Masanao Matsumoto, General Partner and Co-Founder of WiL Inc., Akira Iriyama, Professor at Waseda Business School, Waseda University Graduate School, and Tomoko Igarashi, CFO of Soracom Inc., and the moderator Kanazawa and the three guests participated in a discussion. First, the three guests introduced themselves and then the discussion began. Below is an excerpt and summary of the discussion.
Kanazawa：First, let me explain what a swing-by is. A swing-by is a space term that refers to a space probe accelerating by using the gravity of a planet. The planet represents a large company, and a swing-by is like a startup accepting M&A with a large company and then utilizing its assets. The main advantage is that it makes full use of the funds, resources, and creditworthiness of a large company, while the disadvantage is that it is acquired once, so independence is not maintained, governance becomes complicated, and there is a risk of cultural conflicts occurring.
Mr. Igarashi (hereafter, titles omitted)：Soracom was founded in November 2014. The company has bases in Tokyo, the United States, and London, and has 11 employees. As the company has always aimed to be global, one-third of its members are based overseas. As a business, it is a BtoB service that provides global IoT platform services to support your digital transformation. Although it was a unicorn company that joined the KDDI Group, it had the intention of growing big under a major company. After joining a major group, it considered an IPO as an option to take on a new challenge and make a further leap globally, and announced the concept of a swing-by IPO. As a result, when Soracom first joined KDDI, the number of IoT lines was 150, but as of 1, it has exceeded 3 million lines and currently exceeds 8 million lines.
The swing-by IPO is a three-stage rocket. The first stage is a change in capital policy, and the second stage is the participation of six shareholders. Finally, it was listed in March 1.
KanazawaA swing-by IPO is like a three-stage rocket. How did this concept come about?
(I.e.：We thought that if we had a different capital policy from KDDI, it might be seen as a bad relationship with KDDI. Instead, we needed to come up with a positive concept to aim for further growth. Also, all of our members love space, and we wanted to take it to the next level by using the assets of a large company, so we decided on this name.
Kanazawa: What were some of the challenges you faced while pursuing a swing-by IPO, and how did you overcome them?
(I.e.: I think we overcame this by taking careful steps, while keeping in mind the unique situation at large companies where processes have to be changed even if the results remain the same.
Mr. Matsumoto (hereafter, titles omitted): I think the reason the swing-by IPO was able to be achieved was because KDDI and Soracom agreed to expand their business globally.
Kanazawa:Swing-buy IPOs are said to be a win-win scheme for large companies and startups, but what do you think are the conditions that make this a good option?
Mr. Iriyama (hereafter, titles omitted): The biggest condition is the characteristics of the president of a large company. It is important that he is a calm and strategic person who will rule for the long term. A swing-by IPO will not go well for a company whose president changes every two or three years. The second condition for a startup is to be global. Going abroad will help the business grow. It is difficult for startups that operate on a small scale domestically to do a swing-by IPO.
The third condition is to be serious. Soracom is a rare company that has gone all the way to an IPO with almost all of its members being science majors. I think it is important to be very serious, sincere, and have an unwavering core.
Q:As a VC fund that invested from seed, did it ultimately turn out well for you?
A. Matsumoto:Considering the total financial return, I would say it was a very good result.
Q:I believe that it was precisely because you brought together courageous and ambitious people that you were able to achieve Japan's first listing through a swing-buy IPO, but how did such encounters come about?
A. Matsumoto: Since the company was founded, the members of SORACOM have had the same aspirations. I think that such people naturally gather in such an organization.
A. Iriyama: I don't think you need to think too much about "meeting people." If you have that kind of ambition and charm, you will be involved with people with high ambitions. The CEO of Soracom was a fellow student I studied abroad with, and he's a really nice guy. Good people will naturally gather around you.
A. Igarashi: I think it's important to get the support we need. This swing-by IPO is an important milestone for us, but we don't think it's the end; we think it's also a step to the next step. It's important to increase the number of supporters who support us.
