Q&A: Intel Capital's Takayuki Sasaki

Q: Intel Capital, and the broader Intel organization, have focused on data-centric applications in recent years. How does Japan fit into that strategy?

A: One of the obvious applications of big data is in artificial intelligence (AI). In Japan the AI sector has certain characteristics shaped by the country’s history. Japan has a long heritage of manufacturing and hence a deep infrastructure and many large manufacturing companies. This is one of the reasons why so many Japanese industrial robotics companies have a major market share worldwide. So as a result of that Japan has a very good environment for start-ups developing technology relevant to industrial robotics. AI development has been shaped by that as well, and many of our investments relate to AI as it applies to robotics. 

 

Q: How does this manufacturing heritage contribute to AI development?

A: In general, AI consists of training and inference. You have to train the AI properly, and then you have to implement that training into the appropriate hardware. AI companies in the US generally focus more on the cloud side, whereas companies in Japan tend to look at the edge side. In manufacturing, many things have to be done with precise timing, and the cloud introduces time delay and latency. So this influences the focus of Japanese AI developers. One of our investees is a company called LeapMind, an AI developer focusing on edge side implementation. They’ve developed the ability to compress a deep neural network very small while still maintaining performance. That’s useful because it allows manufacturers to reduce cost, reduce power consumption, and shrink the form factor.

 

Q: Does this type of AI have applications outside of industrial settings?

A: Another interesting investee working on edge-side AI technology is Empathy, which makes point-of-sale (POS) systems. This market in Japan has been dominated by a few companies, and they sell a type of POS that’s old-fashioned and very expensive. Empathy has come up with a compact POS in a tablet form that can accept many types of cashless payment. In addition, the team is working on image-recognition software so the tablets can be mounted on shopping carts and scan items as the customers put them in. When you’re finished you can use your card or device to check out. This shows the potential for miniaturizing AI technology. 

 

Q: What kind of exit opportunities does the Japanese market offer for VC-backed companies?

A: Historically Japan has been more receptive to IPOs by VC-backed companies than other markets. The Tokyo Stock Exchange has the Mothers (market of the high-growth and emerging stocks) section, which allows listings by companies with lower revenues than the main board. So it’s relatively easy for a start-up to list in Japan. However, we have also seen an increase in M&A opportunities from Japan’s large companies. Many of the large-cap companies in the US – like Google, Apple, and Intel  – are relatively young, while the large-cap Japanese companies have a very long history and a lot of internal bureaucracy, which makes it hard for them to innovate. They’re moving away from developing technology in house toward looking for innovation outside of the company. This is also leading to greater corporate venture capital activity as many large Japanese companies have started making their own VC investments.

 

Q: What kind of investment approach do you see from these investors?

A: These new corporate VC units follow a wide range of strategies. Some are very tightly linked to the business unit, in that they tend to combine the equity investment with some kind of well-defined business collaboration agreement. In other cases, these links are looser – they’ll do equity investment, but it’s more risk-taking, and leave possible collaborations to the future. Some companies will also support outside managers, while making their own VC investments. For example, Sparx launched a fund with Toyota as a major LP, since Sparx often invests in companies that are relevant to Toyota’s interest. However, Toyota now also has a direct investment unit that it launched last year. There are a couple of such cases in Japan. 

 

Q: How much support is there in Japan for the idea of entrepreneurship and risk-taking?

A: Rising levels of M&A and corporate VC investment are helping make Japan a good environment for start-ups. I think we are also definitely seeing a big cultural shift. A survey of students at prestigious Japanese universities showed many of the top students wanted to become entrepreneurs after graduating. That’s a big change from before, when top students would all want to join big companies, and it shows how the culture is changing. For example, at the University of Tokyo there is now an organization to promote entrepreneurship, based upon the university’s findings regarding their students’ ambitions, and they are helping these young graduates to become successful entrepreneurs.  

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• Topics
• North Asia
• Technology
• GPs
• Japan
• Intel Capital
• TMT
• Venture
• manufacturing