The challenge of UTokyo IPC in driving Deep Tech innovation

J-STORIES – UTokyo IPC is a number one enterprise capital agency in Japan that helps a various vary of startups in deep tech fields with the potential to considerably impression society, comparable to healthcare, house, synthetic intelligence (AI), environmental expertise, and agri-tech. Past funding, UTokyo IPC goals to create an innovation ecosystem for startups by increasing its actions into entrepreneurial help and expertise matchmaking. In recent times, its collaborations haven’t solely included universities and personal firms throughout Japan, but additionally prolonged to worldwide enterprises. We spoke with Kei Furukawa to be taught extra about their targets and the way UTokyo IPC is fostering entrepreneurship.

UTokyo IPC was established in 2016 as a public-private fund with the purpose of supporting university-originated startups.

J-STORIES: First, may you inform us about UTokyo IPC? It was established in 2016 as an funding firm with 100% capital from the College of Tokyo. Are you able to clarify the background and the need for the College of Tokyo to create such a corporation?

Kei Furukawa: The muse of UTokyo IPC is intently tied to the 2013 government-private innovation program, the place the federal government took measures to acknowledge funding firms for 4 nationwide universities (Tokyo, Kyoto, Osaka, and Tohoku). This initiative aimed to supply additional help for university-originated startups at a time when the federal government was allocating budgets for such functions. On this sense, our institution (UTokyo IPC) carries a powerful policy-driven facet.

J-STORIES: UTokyo IPC began with “IPC Fund 1” in 2016, which obtained investments from each authorities and personal firms as a public-private fund.

KF: IPC Fund 1 had two primary kinds of investments: one was a “fund of funds,” which concerned investing in non-public enterprise capitals, and the opposite was direct investments in startups. At the moment, there was a development to draw extra energetic non-public enterprise capitals across the College of Tokyo, and we wished to play a task in strengthening new or current funds by means of the fund of funds strategy.

Again then, many enterprise capitalists have been targeted on “seed” and “early” stage startups, whereas there was a noticeable lack of help for “center” and “later” stage startups, which had reached profitability or have been on a progress trajectory. The intention behind the public-private fund was to handle this hole by means of direct funding. Primarily, our fund goals to collaborate with current non-public enterprise capitals and supply help in these essential levels.

Japanese Companies Nonetheless Have Large Untapped Potential

J-STORIES: In 2020, AOI Fund 1 was created because the second fund. What are its primary options?

KF: The AOI 1 Fund has two primary traits. Firstly, it focuses on “carve-out investments,” the place we separate a enterprise unit or subsidiary from an organization to start out it up as an impartial startup. Secondly, it includes early-stage investments (seed investments) in startups that purpose to leverage numerous assets from giant firms to advertise progress. Japanese firms haven’t solely human assets and capital but additionally numerous different belongings comparable to distribution channels and gear. On the identical time, lots of their merchandise have nice potential. Nonetheless, there are limitations to commercializing these merchandise inside giant firms, comparable to gradual decision-making processes or a small market demand that won’t justify the enterprise inside a big company construction. Due to this fact, the fund was established with the objective of spinning these off and nurturing them as startups. Being a subsidiary of the College of Tokyo, we additionally help industry-academia collaboration to make sure that the outcomes from the college are successfully utilized by our portfolio firms.

Relating to seed investments, our technique includes investing in new startups which can be well-connected with firms, enabling them to attain speedy progress.

Supporting the Home Funding Atmosphere, Together with Regional Areas, by Investing in Enterprise Capital Funds that Help Startups

J-STORIES: In 2024, ASA Fund was established because the third fund. It’s characterised by investing in funds of funds that help university-originated startups and different college enterprise capital funds. Are you able to inform us extra about this?

KF: Sure. ASA Fund, our third fund, is a collaboration with the Tokyo Metropolitan Authorities. The Tokyo Metropolitan Authorities wished to additional promote and help deep tech (scientific discoveries or modern applied sciences that handle social points and have a big impression on our lives and society), and so they referred to as for fund proposals. We have been chosen for this initiative. We really feel that the funding atmosphere round deep tech remains to be missing, and there are helpful applied sciences sleeping in numerous universities, together with these in regional areas throughout Japan. We need to help the commercialization of those applied sciences from universities. I feel there are lots of methods to strategy this.

J-STORIES: Thanks. Not too long ago, whereas there appears to be a rise in startup funding in Japan with each private and non-private sectors concerned, it’s also famous that there are few startups reaching unicorn standing. With the institution of UTokyo IPC’s three funds, what particular points are you aiming to handle?

KF: Our major focus is on tech-related fields. We imagine that help and funding in university-originated or university-linked startups are nonetheless inadequate. Because of this the federal government additionally noticed the necessity for public-private funds like ours. Our primary position is to fill these gaps.

We won’t compete with different enterprise capitalists, however will work collectively to help one another

J-STORIES: In that sense, one of many traits of your strategy appears to be much less about competing with current non-public enterprise capitalists and extra about cooperating to raise the general help for startups?

KF: Precisely. We aren’t fascinated about competing with different enterprise capitalists. As a substitute, our focus is on how we are able to collaborate to help deep tech, which requires important time and funding. It is extremely necessary to work collectively and supply help collectively.

Supporting Early-Stage Entrepreneurs Who Do not Know the First Steps

KF: The 1stRound program is an incubation help initiative hosted by UTokyo IPC, with the first objective of helping early-stage startups originating from universities and analysis establishments. Usually, startups that start from educational analysis wrestle with understanding enterprise points or figuring out what to do for preliminary fundraising. They might face difficulties in securing funding within the early levels, so we purpose to help them as a lot as attainable to keep away from these pitfalls.

Essentially the most notable function of this system is that if chosen, startups obtain as much as 10 million yen in exercise funds with out having to provide away fairness. This sort of help with out taking fairness is kind of uncommon.

Moreover, through the six-month incubation interval for chosen startups, we assist them develop their enterprise plans and help them in reaching their preliminary fundraising in the absolute best method. The objective is to safe the absolute best funding from the very best enterprise capitalists. If there are wonderful buyers within the non-public sector, we assist make sure that the startup can efficiently increase funds from them. This system is run in an open and supportive method.

We’ve got chosen 85 firms to this point, and about 90% of them have efficiently accomplished their fundraising. Some have obtained funding from us, whereas others haven’t, however the overwhelming majority have managed their funding effectively, and there are only a few instances of firms failing. Some startups have even achieved enterprise progress with out fundraising, by successfully using grants and different assets.

90% of Accepted Startups Obtain Funding

J-STORIES: Not solely have 90% of the accepted startups achieved funding, however additionally they have a formidable monitor document of remaining viable. What are the explanations behind these excessive achievements?

KF: There are three primary causes. The primary is our skill to discern timing. There are a lot of university-originated startups and concepts, however timing is essential. If a challenge remains to be within the growth stage and hasn’t but linked to a enterprise alternative, it might not succeed. Having the ability to assess this timing successfully is a big power of ours.

The second cause is our help system. We offer strong help by means of our capitalists and devoted employees. Moreover, we obtain help from numerous professionals, comparable to attorneys and accountants, in addition to info expertise service suppliers like Amazon Net Companies. This numerous vary of help helps nurture the startups.

The third cause is the excessive stage of consideration we obtain. Many enterprise capitalists have an interest, which helps create a well-functioning ecosystem. Furthermore, we don’t bear the prices ourselves; as an alternative, we obtain help from 22 sponsor firms. As talked about with AOI Fund 1, we worth nurturing startups along with giant firms from the early levels.

Moreover, this program, which began in 2017 on the College of Tokyo, has now expanded to 19 nationwide universities, non-public universities, and nationwide analysis institutes. There aren’t any different applications that cross college boundaries on this method, so we’re very happy with this growth.

Supporting Expertise Matching within the Deep Tech Business

KF: Sure, I imagine that expertise is essential for startups. In fact, expertise and funding are necessary as effectively, however attracting proficient people to a startup and nurturing them inside the firm is crucial. Particularly within the deep tech discipline, the place particular technical data is required, discovering the correct expertise might be difficult. Moreover, even when wonderful expertise is developed in a lab, points comparable to who will tackle the position of CEO are important challenges within the deep tech sector.

J-STORIES: This is perhaps associated to the truth that Japan has not seen many unicorn firms emerge from its startups. There’s a critique that regardless of having many wonderful applied sciences inside universities, they haven’t been absolutely commercialized. Particularly, within the discipline of deep tech, have been there conditions the place issues comparable to difficulties in matching expertise and the dearth of personnel who perceive enterprise hindered the expansion of startups?

KF: Whereas expertise will not be the one situation, it’s actually a big issue. Up to now, the excessive danger related to startups could have deterred proficient people from becoming a member of. Nonetheless, the startup ecosystem is changing into extra dynamic, with general wage ranges rising and the character of those modifications evolving. Our position is to match wonderful analysis outcomes and applied sciences with proficient people, and we purpose to attain this successfully.

Increasing the Innovation Ecosystem Nationwide Together with Business, Academia, and Authorities

J-STORIES: UTokyo IPC goals to “additional increase the innovation ecosystem each domestically and globally,” as said on its web site. May you briefly clarify why this innovation ecosystem is critical? Traditionally, there appears to have been challenges in Japan with easily coordinating between the federal government, non-public sector, and universities. If that’s the case, how can an “ecosystem” assist handle these points?

KF: It’s a bit difficult to reply in short [laughs]. With regards to the collaboration between startups and huge firms, whereas there have been profitable instances, there have additionally been many that did not work out. Giant firms usually have their very own norms and methods of considering, so startups could discover it tough to align their concepts with these of enormous firms, resulting in points in commercialization. Nonetheless, open innovation has superior in comparison with the previous. It’s not simply that now we have acted as intermediaries, but additionally that the general market sentiment and the need for big firms to collaborate with startups have advanced. Over the previous two or three years, the rise of company enterprise capital and the circulate towards collaboration have deepened the connections between {industry}, academia, and startups.

Our position is to keep up this momentum and create profitable examples in order that investing giant firms can see returns. By repeating this course of, we are able to increase the ecosystem throughout the nation and scale back the expansion interval losses.

J-STORIES: Whereas collaboration between {industry}, authorities, and academia is necessary, it may additionally improve the variety of stakeholders concerned in decision-making, doubtlessly making it slower. Startups usually require fast decision-making. How ought to we handle this situation?

KF: Giant and medium-sized firms have established constructions and shareholders, which may decelerate decision-making. It’s usually mentioned that giant abroad firms make selections sooner than Japanese firms, however in actuality, the variations might not be as important. The secret’s to make selections successfully. In Japan, being overly cautious is usually a distinctive downside for big firms. However, extra giant firms now have decision-making authority at decrease ranges, comparable to division heads or part chiefs, which appears to be bettering the velocity.

J-STORIES: Are you able to present some particular examples of profitable startups that originated from college analysis supported by the UTokyo IPC?

KF: There are a number of patterns. As an example, now we have supported commercialization from college analysis labs in fields comparable to drug discovery, supplies science, and robotics. These kinds of help take appreciable time, so we’re dedicated to persevering with these efforts with a watch towards creating the next-generation industries. However, there are additionally many instances the place we put money into startups that have been established independently from our founding actions.

J-STORIES: Are the startups you put money into primarily people who have developed applied sciences on the College of Tokyo?

KF: Whereas we do help startups rising from the College of Tokyo, it’s additionally essential to concentrate on the right way to successfully make the most of the college’s analysis belongings. Startups that don’t initially have a relationship with the College of Tokyo can nonetheless develop their companies by leveraging the college’s analysis outcomes by means of joint analysis, and we offer help in these instances as effectively. our portfolio, about 10% of our investments are worldwide, and in every of those instances, College of Tokyo belongings are being utilized.

J-STORIES: Talking of worldwide issues, the UTokyo IPC has said one among its targets is to turn out to be “one of many world hubs for enterprise creation.” As you proceed to increase efficiently, may you share your imaginative and prescient for the close to or distant future, and the way you propose to attain this growth?

KF: We imagine that increasing in our present kind, together with the fund, is the very best strategy. We purpose to broaden our actions, together with rising the variety of startups by tenfold. Nonetheless, a very powerful facet is producing fund returns. When returns are reinvested into the College of Tokyo, they’ll stimulate additional analysis, resulting in the creation of recent startups and applied sciences, thus advancing the ecosystem. We’re nonetheless originally and are bettering our strategy step-by-step.

J-STORIES: Let’s handle a extra unfavorable facet. Japan’s GDP progress charge has been sluggish for years, and there are world issues about Japan’s financial progress resulting from points like declining start charges and an getting older inhabitants. To revitalize Japan’s economic system, it appears important to collaborate with abroad firms and analysis establishments. What’s your perspective on how Japan ought to set up its place in world enterprise?

KF: Certainly, Japan is experiencing a declining start charge and an getting older inhabitants, and its progress charge is sluggish. Nonetheless, Japan remains to be the world’s fourth-largest economic system by GDP, which means it nonetheless has important monetary assets and lots of world firms stay robust. Inside this context, we have to additional strengthen the “enterprise ecosystem” to repeatedly produce quite a lot of firms. It’s essential to create startups that may compete globally, not simply domestically. Personally, whereas producing unicorns is necessary, it’s additionally helpful to foster firms with cutting-edge applied sciences that won’t develop to unicorn standing however can seize market share and possess world strengths. Moreover, I need to talk to worldwide startups that Japan has cash, together with from giant firms’ enterprise capital, and encourage them to benefit from it. Japan additionally gives a big market, so I hope that firms will use belongings just like the College of Tokyo to bridge their actions in Japan.

J-STORIES: Your level about “cutting-edge applied sciences” could be very significant. At our media outlet J-STORIES, we actively report on crucial initiatives that, whereas not core applied sciences like semiconductors, are essential for bettering the world, comparable to new applied sciences for aged help in response to declining start charges and getting older, initiatives that sort out pure disasters like typhoons, and new concepts for catastrophe reduction. Japan possible has a bonus in such fields. Are you contemplating supporting startups in these areas as cutting-edge applied sciences?

Actively Participating with Taiwanese Corporations and Exploring Funding Alternatives

J-STORIES: Taiwanese firms are sometimes perceived as extremely aggressive in semiconductor manufacturing. With regards to collaboration between Japanese and Taiwanese startups, what sort of complementary relationships do you anticipate?

KF: There are a lot of prospects for collaboration. As an example, college collaborations like ours or partnerships between startups rising from these establishments might be very useful. Ideally, mutual investments in one another’s startups can facilitate entry into one another’s ecosystems, which is essential.

J-STORIES: Taiwan and South Korea are sometimes seen as having cultural and way of life similarities with Japan, in addition to comparable political laws, which can facilitate collaboration. From a enterprise capitalist’s perspective, how do you view this?

KF: Sure, once I first visited Taiwan, it felt virtually like being in Japan. The cultural similarities have been so robust that it was a bit disorienting [laughs]. There’s a excessive stage of mutual respect between our cultures, and I imagine this may positively contribute to our collaboration.

J-STORIES: This might not be restricted to Taiwan, however from the angle of supplementing Japan’s shortcomings by means of worldwide cooperation, what are the points you hope to realize? It would sound unfavorable to say “shortcomings,” nevertheless it may very well be rephrased as “inspiration.”

KF: Slightly than specializing in Japan’s deficiencies, it’s about receiving inspiration. Given numerous political and situational components, the power of Taiwan to develop industries quickly with the mixing of presidency, academia, and {industry} in a brief interval is one thing we are able to be taught from. Though not every little thing will straight apply to Japan, there are points that might function helpful references when Japan focuses on sure fields sooner or later. Taiwan has assets in numerous areas, together with however not restricted to semiconductors, so we hope to collaborate and turn out to be companions in tackling world challenges.

J-STORIES: The efficient and speedy collaboration between {industry}, authorities, and academia in Taiwan has been a concrete instance. Sooner or later, when Japan and Taiwan advance large-scale collaborations, do you count on that incorporating stakeholders from culturally totally different backgrounds may stimulate sooner decision-making?

KF: We’ve got excessive expectations. Whereas Japan has its personal strengths, Taiwan additionally has its benefits. There are issues we are able to provide, and, likewise, areas the place we are able to be taught from Taiwan. We’re initiating dialog with numerous events and hope to supply what we are able to. Our objective is to facilitate collaboration and make helpful contributions to our joint efforts.

Discovering Motivation in Direct Encounters with Numerous Researchers on the College

J-STORIES: Lastly, I would wish to ask you about your self, Mr. Furukawa. Earlier than becoming a member of the UTokyo IPC in 2019, you labored in non-public firms like Sony and obtained an MBA from INSEAD (a prestigious enterprise faculty identified for its worldwide focus). What impressed you to get entangled in startup help?

KF: My first publicity to the startup world got here once I was at INSEAD for my grasp’s diploma. It was there that I realized about enterprise capital for the primary time. Whereas beginning my very own enterprise was one choice, I used to be extra motivated by the will to be concerned in numerous fields, meet totally different entrepreneurs, and discover a variety of alternatives. I discovered the enterprise capital position to be fairly intriguing.

Once I joined the UTokyo IPC in 2019, it was largely resulting from a lucky alternative that got here my method. Previous to that, I had labored with government-affiliated funds and had an curiosity in contributing to nationwide growth. Furthermore, being at a college permits me to satisfy a variety of researchers straight, which is a powerful motivator for me. The distinctive perspective gained from being in an educational atmosphere is each fascinating and helpful.

J-STORIES: You talked about assembly numerous researchers. Out of your perspective, having seen analysis originating from establishments just like the College of Tokyo, do you see potential in present university-originated analysis in Japan?

KF: Completely. There’s a huge quantity of basic and utilized analysis that we could not but pay attention to. There are a lot of initiatives that I feel could be very fascinating in the event that they have been developed into companies, and I’m desperate to help them.

Translated by J-STORIES（Anita De Michele, Lucas Maltzman)

Prime picture: J-STORIES (Emi Takahata) 

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