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Blogging as a recruiting tool

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. During a return visit to France last month, I caught up with a successful French entrepreneur (whom I wish I would have backed on his first venture, but that’s another story). Anyway, he opened the conversation with flattery, claiming that I had inspired him. So of course I’m growing suspicious at this point, either expecting a punch line or reconsidering my assessment of his sound judgment. But he wasn’t joking. Rather, he stated that a blog post I wrote several years ago inspired him to adopt a habit which has now given his company a competitive advantage in recruiting talent. Specifically, he was referring to something that I had written way back in 2013: The importance of blogging for entrepreneurs….

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.

Image credit: Pxfuel

During a return visit to France last month, I caught up with a successful French entrepreneur (whom I wish I would have backed on his first venture, but that’s another story). Anyway, he opened the conversation with flattery, claiming that I had inspired him. So of course I’m growing suspicious at this point, either expecting a punch line or reconsidering my assessment of his sound judgment. But he wasn’t joking. Rather, he stated that a blog post I wrote several years ago inspired him to adopt a habit which has now given his company a competitive advantage in recruiting talent.

Specifically, he was referring to something that I had written way back in 2013: The importance of blogging for entrepreneurs.

As I posited back then, regular blogging is about far more than shameless self-promotion; it’s about communication of thoughts, transparency in opinions, and beta-testing ideas with the sounding board of your readers. Regular blogging exercises the muscles of intuition and creativity. It facilitates achieving clarity in your mind’s eye, and it establishes you as a thought leader in your domain.

The fifth benefit I had cited in particular has proven especially relevant to this French entrepreneur I caught up with. Consistent blogging over the years is paying dividends to him now as his most effective recruiting tool.

The market for hiring talent, especially software developers, is insanely competitive right now across Europe, he told me. Startups are finding themselves outbid for developers by deep-pocketed incumbent companies, or increasingly, by other startups who have recently closed on massive fundraising rounds.

By having established his voice over the years through blogging, this guy inadvertently compiled a loyal following of readers who subscribe to the narrative of his ambition. Now, when he posts a job opening, he benefits from a ready-made audience. Better yet, candidates from this audience often prove to fit well culturally, because they’ve already been indoctrinated into his company’s vision over the years.

Blogging is playing a long game. The fruits of it do not appear immediately, causing many people to abandon it prematurely. Yet this entrepreneur is now reaping the rewards of his long-term investment. Given today’s war for talent, by accelerating the recruiting process and attracting individuals who are already on board with his project, the returns are astronomical.

Granted, the world has changed in the 8 years since I originally wrote that piece on the powers of blogging. There are other ways to evangelize and build a following as an entrepreneur. Podcasting, for example.

Creating something that does not rely on the approval of others can offer limitless upside. Naval Ravikant refers to this concept as permissionless leverage.

I like this articulation and will adopt it too.

Japan’s sticker character production Quan to merge with cartoonist agency Wwwaap

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See the original story in Japanese. Tokyo-based Quan, the Japanese startup producing characters like Betakkuma and Business Fish for messaging stickers, has announced that it will merge with Wwwaap (pronounced ‘warp’), an agency of cartoonists and influencers. The two companies will be merged by January of 2022 to establish a new company called Minto. Quan’s CEO Kazuhiro Mizuno will be appointed as the CEO of the new company while Wwwaap’s CEO Genta Nakagawa, Wwwaap’s director Nobuyuki Takahashi, and Quan’s director Jun Oagawa will join the new company’s director board. In the U.S., influencing creators such as YouTubers, Instagramers, and Tiktokers are expanding their fan base all over the world, which has grown the creator economy up to over $104 billion US. Meanwhile, Japan’s creator economy is centered on two-dimensional content, mainly on manga and anime illustration. Webtoons originally from South Korea has recently spread into the Japanese market, which lets Kakao Japan operating the Piccolo manga app become valued over $7 billion US by riding on the wave. We won’t go into detail about Quan’s business here because we’ve covered them many times while Wwwaap was founded in 2016 by Nakagawa, who started a manga editing team and an app…

Nobuyuki Takahashi (Co-CEO of Wwwaap), Kazuhiro Mizuno (CEO of Quan), Genta Nakagawa (Co-CEO of Wwwaap)
Image credits Quan, Wwwaap

See the original story in Japanese.

Tokyo-based Quan, the Japanese startup producing characters like Betakkuma and Business Fish for messaging stickers, has announced that it will merge with Wwwaap (pronounced ‘warp’), an agency of cartoonists and influencers. The two companies will be merged by January of 2022 to establish a new company called Minto. Quan’s CEO Kazuhiro Mizuno will be appointed as the CEO of the new company while Wwwaap’s CEO Genta Nakagawa, Wwwaap’s director Nobuyuki Takahashi, and Quan’s director Jun Oagawa will join the new company’s director board.

In the U.S., influencing creators such as YouTubers, Instagramers, and Tiktokers are expanding their fan base all over the world, which has grown the creator economy up to over $104 billion US. Meanwhile, Japan’s creator economy is centered on two-dimensional content, mainly on manga and anime illustration. Webtoons originally from South Korea has recently spread into the Japanese market, which lets Kakao Japan operating the Piccolo manga app become valued over $7 billion US by riding on the wave.

We won’t go into detail about Quan’s business here because we’ve covered them many times while Wwwaap was founded in 2016 by Nakagawa, who started a manga editing team and an app marketing team at a major digital ad agency. With more than 250 creators, mainly manga and anime creators attracting fans through social network channels, the company has successfully monetized their content by making companies to use them for promotion. It claims that 80 to 90% of the manga illustrations used in Twitter ads in Japan are created by them. In other words, they can be called a multi-channel network for manga artists.

Nakagawa says,

In this industry, even if you are extremely talented (as an artist), you can’t make a living. While there are many people quitting, we have succeeded in monetizing their works to tell them how much we can pay them if they have a certain number of followers. We have over than 250 manga artists having 10,000 followers, and some of them are housewives earning 10 million yen ($8.8 million US) a year.

By joining forces, the two companies are expected to create several complementary relationships. It allows Quan to distribute Wwwaap’s creators’ works through Quan’s vast region-wide network in Asia while Wwwaap will be able to expand its sales channels. In addition to their own characters, Quon will be able to play a trader role in the distribution of third-party content.

Mizuno says,

Whether it’s webtoon or animation, there are so many small productions are working here. It is true that this has created diversity, but in order to be strategic and dynamic business, a certain level of scale is necessary. If we only had our own characters, we would not be able to cover all the demands form clients. After subsiding the pandemic, it would be especially difficult to differentiate ourselves from other competitors from the rest of the world.

Some of characters and manga titles by Quan and wwwaap
Image credit: Quan, Wwwaap

Mizuno’s and Nakagawa’s different areas of expertise will complementary work. Despite several business models in hand Quan has been focused on monetizing by character merchandising as well as promotion use for companies in Asia after gaining popularity of unique characters through the use of free messaging stickers. Having successfully established his own business in Japan, Nakagawa expressed confidence in the business potential after the merger in terms of diversifying revenue stream in the region.

Japan’s Flatt Security nabs $1.8M to help developers fix security issues in codes

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Tokyo-based cybersecurity startup Flatt Security announced on Monday that it has secured about 200 million yen (about $1.8 million US) in equity and loans from B Dash Ventures, FinTech Global, and an unnamed business company. For the startup, this follows their $2 million funding back in July of 2019. The latest round brought their total sum of funding up to date to 450 million yen (about $4 million). Under its previous name of Flatt, the company was founded in May of 2017 with most of its members from millennials attending the University of Tokyo. Initially, they had been developing a live commerce app called PinQul but subsequently pivoted to the cybersecurity business and rebranded themselves in 2019. Flatt Security currently provides vulnerability assessment service as well as a secure coding learning platform for web engineers called Kenro. The company is launching a new product called Shisho for the global market, aiming to eliminate the gap between product development and cybersecurity measure within a team. In the app development, we see sometimes a trade-off between security and usability, and also that between ensuring safety and enriching functionality. The company’s solutions are designed to bridge the gap between app development engineers and…

The Flatt Security team
Image credit: Flatt Security

Tokyo-based cybersecurity startup Flatt Security announced on Monday that it has secured about 200 million yen (about $1.8 million US) in equity and loans from B Dash Ventures, FinTech Global, and an unnamed business company. For the startup, this follows their $2 million funding back in July of 2019. The latest round brought their total sum of funding up to date to 450 million yen (about $4 million).

Under its previous name of Flatt, the company was founded in May of 2017 with most of its members from millennials attending the University of Tokyo. Initially, they had been developing a live commerce app called PinQul but subsequently pivoted to the cybersecurity business and rebranded themselves in 2019.

Flatt Security currently provides vulnerability assessment service as well as a secure coding learning platform for web engineers called Kenro. The company is launching a new product called Shisho for the global market, aiming to eliminate the gap between product development and cybersecurity measure within a team.

In the app development, we see sometimes a trade-off between security and usability, and also that between ensuring safety and enriching functionality. The company’s solutions are designed to bridge the gap between app development engineers and security management engineers, who are often completely separated in doing their jobs each other.

Shisho
Image credit: Flatt Security

In addition to general cloud configuration and app diagnostics, Flatt Security offers diagnostics specific to the users of Firebase, one of popular no-code backend environment tools. When Japanese accounting company Freee acquired bookkeeping app Taxnote in June, Flatt Security’s diagnostics were adopted for evaluation upon acquisition and throughout subsequent operations.

The company has been focused on consulting and a learning platform but is aiming to expand its business with greater scalability by launching a security product for developers around the world.

In Bridge’s interview with Flatt Security’s Chief Creative Officer Keijiro Toyoda, he says,

Shisho’s goal is to create security tools that are easy for developers to use. Previous tools did not support modern technology stacks and did not support the latest diagnostic methods. […]

We would like to eliminate the gap between operating companies and security vendors which we have seen in the system development. First of all, we will closely work with ecosystems of developers, and eventually create a system that can suggest code fixes with just a single click.

Flatt Security hopes to expand Shisho’s global reach by penetrating the developer community. In order to achieve this, the company has released the vulnerability detection and correction engine, which is the technical core of Shisho, as open source software, and also released the SaaS-based beta version of the product earlier this month. They plan to use the revenue from existing businesses and the funds from the latest round to accelerate the launch of the new product.

Why I tend to prefer equity rounds over notes

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This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here. All but two of my last 10 investments have taken the form of straight equity. Furthermore, all of the deals in which Shizen Capital was lead investor over the past two years have also been for equity rounds. In this post I will lay out the reasons that I prefer equity rounds to convertible notes or SAFE notes in early stage venture investments. For simplicity here, I will use the generic term note to encompass any type of non-equity instrument that is convertible into a startup’s equity in the future based on certain conditions. This includes therefore classic convertible notes as well as SAFE and JKISS notes. [Note: there are some key distinctions in the implementation; notably, SAFE and JKISS…

mark-bivens_portrait

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”

He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.

Modified from a Pixabay image

All but two of my last 10 investments have taken the form of straight equity. Furthermore, all of the deals in which Shizen Capital was lead investor over the past two years have also been for equity rounds. In this post I will lay out the reasons that I prefer equity rounds to convertible notes or SAFE notes in early stage venture investments.

For simplicity here, I will use the generic term note to encompass any type of non-equity instrument that is convertible into a startup’s equity in the future based on certain conditions. This includes therefore classic convertible notes as well as SAFE and JKISS notes. [Note: there are some key distinctions in the implementation; notably, SAFE and JKISS notes generally behave more like warrants than debt, in that they typically do not carry an interest rate nor a maturity date).

My preference for investing with equity rather than a note center on two of the guiding principles we hold dear at Shizen Capital when partnering with founders: alignment and transparency.

First, let’s revisit why notes can seem more alluring than a priced equity round

  1. they are less costly and more expedient to implement from a legal perspective
  2. they sidestep a difficult negotiation over valuation
  3. they can surmount a conflict of interest for investors during an internal round
  4. they grant investors additional optionality and seniority in the financing of the company

Now let’s discuss these characteristics one by one:

True, a note agreement is simply a contract between two parties: the investor (as note-holder) and the startup. At a future point, the note converts into equity or is reimbursed, based on conditions defined in the agreement.

Since no equity is being issued at the time of a note financing, corporate formalities and legal filings are unnecessary. There is no need to update the articles of association, draft a shareholders agreement, or make any formal filings. The investor could even dispense with hiring a lawyer entirely for such a transaction, thus saving fees (the founders could do so as well, though I personally recommend founders seek at least some minimum level of legal counsel). However, once the future hoped-for equity round materializes, all of these aforementioned legal formalities will become necessary.

SAFE notes can be fast but only if the investor moves fast

In theory, transactions with notes (again, including SAFE’s and JKISS’s here) are faster to implement then equity rounds. In theory. If handled deftly, a straightforward equity investment should take a few weeks to implement. A note, in contrast, can be implemented within a few days (especially a SAFE or JKISS, which are based on a standard template). However, I find it cringe-worthy all too often to hear founders lament to me about how their fundraising efforts via a note are dragging out for weeks or months. I admittedly have not performed a scientific analysis on this, but anecdotally my observations are that weeks or months of note discussions are not uncommon in many regions outside of Silicon Valley.

Postponing uncomfortable conversations

Sidestepping a difficult negotiation on valuation can also be an appealing feature of financing via a note, which does not place a price on the equity of the company at the time of the transaction. If a founder and investor cannot agree on valuation at the time of the fundraising, a note postpones this uncomfortable conversation on price.

The distinction between convertible notes and SAFE notes becomes relevant here. While a convertible note often eliminates any reference to valuation, a SAFE note by its very construction usually contains a valuation cap. This valuation cap does not represent the valuation of the company at the time, but it does require some negotiated consensus between the parties, and it also lays the groundwork for future signaling to the market.

Transparency

Furthermore, this is where the principle of transparency comes in. Postponing the uncomfortable valuation conversation is simply kicking the can down the road. Eventually this conversation has to take place, and the stakes will likely be much higher in the future than today. Moreover, numerous other unexpected consequences can arise from this approach. Because I’ve seen this play out across a vast number of companies over the years, often to the detriment of founders, I feel that in the spirit of transparency I have an obligation to alert founders to what I’ve witnessed. [Note: I’ve raised the alarm in detail on this issue here. And here is the Japanese version of the same piece]

Internal rounds

For most professional VC funds, internal rounds can raise compliance issues if not done properly. For avoidance of doubt, by internal round I mean a future financing round of a startup where no significant external parties invest in the company. A VC fund refinancing one of its existing portfolio companies without an external market participant would be required to justify the subsequent valuation if the new round is priced in equity, reflecting an inherent conflict of interest. Employing a convertible note (often structured as a convertible bridge loan in these instances) can surmount this issue

Risk of misalignment

Lastly, financing via a note naturally grants the investor an additional degree of optionality and potentially even seniority in the fundraising.

Let’s start with the notion of seniority (more flagrant in convertible notes than in SAFE or JKISS notes). From an investor’s perspective, sitting senior to all the shareholders in a company offers the best of both worlds: if things go well, convert and reap the upside; if things don’t go well, redeem for your money back plus interest, even if it throws the company into financial distress. Accordingly, the terms of a convertible note document matter. Founders need to review the fine print before entering into one.

The notion of optionality is a bit more nuanced. As a VC, I welcome optionality; in fact I actively seek it out for sound portfolio management. However, I want the founders into whom I invest to fully understand the implications of it in the case of notes. Let’s illustrate with a simple example: the VC invests 50 million yen in a seed round via a SAFE note that contains a 20% discount and a 400 million yen valuation cap. When it’s time for the Series A, the respective interests of the investor and founder diverge due to a slight misalignment. The founder’s proximate incentive is to boost the valuation of the series A higher, and preferably high enough to neutralize the discount, i.e. above 500M¥. In contrast, the investor’s incentive favors a lower valuation, because the lower the valuation of the Series A, the greater the number of shares into which the investor’s note will convert. Had the seed round been raised as a priced equity round rather than via a note, both founder and investor would be aligned in the dilution they would face from the future Series A.

I am not ideologically opposed to investing notes. Here at Shizen Capital we approach every prospective investment as a long-term relationship. Accordingly, we believe that the better we can align incentives and act with transparency with the founders we back, the healthier and more fruitful our collective partnership will be.

SmartRyde helps travelers book airport cabs in 150 countries, nabs series A round

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SmartRyde, the Japanese startup behind a global airport transfer marketplace under the same name, announced that it has secured approximately 180 million yen (about $1.6 million) in a Series A round. This round was led by Angel Bridge with participation from SMBC Venture Capital, Hiroshima Venture Capital, SG Incubate, Yamaguchi Capital, Iyogin Capital, Inventum Ventures, Optima Ventures, and two individual investors: Shoji Kodama(Founder and CEO of Laxus Technologies) and Nobuaki Takahashi (Founder of Phil Company, Representative Partner of NOB). For the company, this follows their seed round in December 2019 when Angel Bridge poured cash injection into the startup for the first time. Originally known as DLGP, SmartRyde was founded in March 2017 by founder Sota Kimura, a student at Ritsumeikan University, after he was ripped off by a cab driver on his way from the airport to the city in Thailand. The company has worked with more than 650 airport transfer cab companies in 150 countries, as well as with more than 25 OTAs (online travel agencies) such as Booking.com, Expedia, Trip.com, Traveloka, and Despega. The company offers airport transfer cab sales service to users purchaing airline tickets through OTAs. The service is beneficial to both OTAs and travelers….

SmartRyde, the Japanese startup behind a global airport transfer marketplace under the same name, announced that it has secured approximately 180 million yen (about $1.6 million) in a Series A round. This round was led by Angel Bridge with participation from SMBC Venture Capital, Hiroshima Venture Capital, SG Incubate, Yamaguchi Capital, Iyogin Capital, Inventum Ventures, Optima Ventures, and two individual investors: Shoji Kodama(Founder and CEO of Laxus Technologies) and Nobuaki Takahashi (Founder of Phil Company, Representative Partner of NOB).

For the company, this follows their seed round in December 2019 when Angel Bridge poured cash injection into the startup for the first time.

Originally known as DLGP, SmartRyde was founded in March 2017 by founder Sota Kimura, a student at Ritsumeikan University, after he was ripped off by a cab driver on his way from the airport to the city in Thailand. The company has worked with more than 650 airport transfer cab companies in 150 countries, as well as with more than 25 OTAs (online travel agencies) such as Booking.com, Expedia, Trip.com, Traveloka, and Despega. The company offers airport transfer cab sales service to users purchaing airline tickets through OTAs.

The service is beneficial to both OTAs and travelers. For travelers, it frees them from the hassle of finding transportation to downtown at the airport. You may know Uber, Grab, and other ridehailing services are not allowed to operate to protect the employment of local cab drivers in selected countries. Furthermore, it may be very helpful to have a driver with your name waiting for you in the arrival lobby, and to have a means of transportation in advance in an environment where you may be less familiar with the language in the destination.

Meanwhile, OTAs are a very thin margin business. They are trying to diversify their product lines to car rentals and various activities in addition to airline tickets and accommodations, but price competition among them intensifies as users try to choose the cheapest option by comparing results from multiple OTAs. Furthermore, OTAs can’t sign contract with every single airport cab operator in the world, but having a bundler like SmartRyde simplifies the coordination process and creates an additional revenue stream.

In general, it is difficult to grab the status quo of demographics of visitors because their nationality may differ from their actual place of residence, but SmartRyde asks for a contact phone number at the time of sign-up, and from that country code, they are able to understand which region’s residents are visiting. According to the company, although business travel demand has decreased due to the pandemic, recently there has been an increase in cases of leisure use by families of 4-6 people, and users from the US (19%) and the UK (16%) have been visiting resorts in the Caribbean such as Cancun and Dominica.

The company will use the funds to hire business developers and engineers from around the world, strengthening system integration with OTAs and building a reservation management system for cab operators. In Japan, as you may see from the names of investors participating this round, the company will focus on revitalizing countryside and tourist destinations in collaboration with local cab operators and these VC firms.

Japan’s cloud-based CCTV solution provider Safie hits $1.6B market cap after IPO

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See the original story in Japanese. Tokyo-based Safie (TSE: 4375), the Japanese startup offering cloud-based CCTV solutions, went public on the TSE Mothers market on Wednesday. The company has priced its initial public offering at 2,430 yen (about $22) a share but it hit the highest price of 3,700 yen (about $33) last week which brought the company’s market cap up to over 180 billion yen (about $1.6 billion). In Japan, Safie is this year’s fourth IPO-ed company with a market cap over 100 billion yen (about $900 million) at its opening price, following Taiwanese AI startup Appier, job-placement portal site BizReach’s parent company Visional, and data analysis firm Plus Alpha Consulting. Safie was founded in October of 2014 by Ryuhei Sadoshima (currently CEO) and his two longtime colleagues who all previously worked at Japanese image processing startup Motion Portrait, a spin-off of Sony’s Kihara Research Center. Sadoshima is also known for Daigakunote.com, his previous startup running a university student portal. The company launched a cloud-based CCTV solution back in 2015. Safie has so far secure funds from NTT Docomo Ventures, 31Ventures (by Mitsui Fudosan and Global Brain), Innovation Fund 25 (by Senshu Ikeda Bank and others), Orix, Kansai Electric…

See the original story in Japanese.

Tokyo-based Safie (TSE: 4375), the Japanese startup offering cloud-based CCTV solutions, went public on the TSE Mothers market on Wednesday. The company has priced its initial public offering at 2,430 yen (about $22) a share but it hit the highest price of 3,700 yen (about $33) last week which brought the company’s market cap up to over 180 billion yen (about $1.6 billion).

In Japan, Safie is this year’s fourth IPO-ed company with a market cap over 100 billion yen (about $900 million) at its opening price, following Taiwanese AI startup Appier, job-placement portal site BizReach’s parent company Visional, and data analysis firm Plus Alpha Consulting.

Safie was founded in October of 2014 by Ryuhei Sadoshima (currently CEO) and his two longtime colleagues who all previously worked at Japanese image processing startup Motion Portrait, a spin-off of Sony’s Kihara Research Center. Sadoshima is also known for Daigakunote.com, his previous startup running a university student portal. The company launched a cloud-based CCTV solution back in 2015.

Safie has so far secure funds from NTT Docomo Ventures, 31Ventures (by Mitsui Fudosan and Global Brain), Innovation Fund 25 (by Senshu Ikeda Bank and others), Orix, Kansai Electric Power, Canon Marketing Japan, NEC Capital Solutions, and others.

Japan’s Citadel AI secures seed round to automatically detect errors in predictions

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Citadel AI, the Japanese startup developing automated AI quality maintenance tools, announced on Monday that it has secured 100 million yen (about $900,000 US) in a seed round from UTokyo Innovation Platform (UTokyo IPC) and Anri. For the startup, this is the first funding from external investors. They launched Citadel Rader in beta in May, aiming to help companies protect themselves from AI-specific risks by automatically monitoring their AI systems, detecting, blocking, and visualizing anomalies. Citadel AI was launched in December by CEO Hironori “Rick” Kobayashi and CTO Kenny Song. Prior to Citadel AI, Kobayashi served Loyalty Marketing as president, Mitsubishi Corporation (Americas) as SVP, and US-based meat processing firm Indiana Packers Corporation as CEO. Meanwhile, Song led the development of TensorFlow and AutoML as a product manager at Google Brain, the tech giant’s AI research and development unit. Unlike traditional hardware-based software, AI systems are exposed to an ever-changing real-world environment that degrades their accuracy and quality day by day. It is important for businesses to maintain the quality of AI functions by automatically detecting anomalies before they are misrecognized and misjudged, resulting in business losses and compliance issues. Citadel Rader has an XAI (eXplainable Artificial Intelligence) function that…

Image credit: Citadel AI

Citadel AI, the Japanese startup developing automated AI quality maintenance tools, announced on Monday that it has secured 100 million yen (about $900,000 US) in a seed round from UTokyo Innovation Platform (UTokyo IPC) and Anri. For the startup, this is the first funding from external investors. They launched Citadel Rader in beta in May, aiming to help companies protect themselves from AI-specific risks by automatically monitoring their AI systems, detecting, blocking, and visualizing anomalies.

Citadel AI was launched in December by CEO Hironori “Rick” Kobayashi and CTO Kenny Song. Prior to Citadel AI, Kobayashi served Loyalty Marketing as president, Mitsubishi Corporation (Americas) as SVP, and US-based meat processing firm Indiana Packers Corporation as CEO. Meanwhile, Song led the development of TensorFlow and AutoML as a product manager at Google Brain, the tech giant’s AI research and development unit.

Unlike traditional hardware-based software, AI systems are exposed to an ever-changing real-world environment that degrades their accuracy and quality day by day. It is important for businesses to maintain the quality of AI functions by automatically detecting anomalies before they are misrecognized and misjudged, resulting in business losses and compliance issues. Citadel Rader has an XAI (eXplainable Artificial Intelligence) function that automatically detects and blocks AI input and output anomalies and visualizes them in a form that humans can understand.

Kobayashi says,

In the development stage, AI reads only clean data, but when it moves to actual operation, it receives a variety of data, including those with input errors. Basically, people think that computers will give correct answers, and even if they give wrong answers, it is difficult to point them out.

Since it is difficult for companies to allocate human resources to monitor the output of AI, our tool may help AI engineers who are usually busy with their daily work find the time to concentrate on their original work.

Image credit: Citadel AI

When a system integrator receives an order for an AI system, they will typically implement the system but not provide services to automate the operation and maintenance afterwards.

Kobayashi continued,

If the accuracy and quality of the data deteriorates, in the worst case scenario, it could lead to errors in sales forecasting, or in credit approval. For example, think FATF (Financial Action Task Force, the global organization working with money laundering regulators in various countries). A single node with poor security in determining a money laundering case could lead to the vulnerability of the entire global network, which could lead to the node not being allowed to join the organization.

He added that Citadel Rader is currently used by more than 10 companies on a trial basis and is in talks with more than 100 companies as potential users. The company plans to use the funds to expand its engineering team for the product’s official launch which is scheduled next spring.

Japanese smart lock developer Photosynth files for IPO

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Tokyo-based Photosynth, the Japanese startup developing and offering smart lock Akerun as well as cloud-based room-entry access control system, announced on Thursday that its application to list on the Tokyo Stock Exchange has been approved. The company will be listed on the TSE Mothers Market on November 5 with plans to offer 700,000 shares for public subscription and to sell 946,900 shares in over-allotment options for a total of 5,613,300 shares. The underwriting will be led by Daiwa Securities and Credit Suisse while Photosynth’s ticker code will be 4379. Based on the estimated issue price of 1,500 yen (about $13.4), the company will be valued at 22.9 billion yen (about $204.2 million). Its share price range will be released on October 19 with bookbuilding scheduled to start on October 20 and pricing on October 26. According to the consolidated statement as of December 2020, they posted revenue of 1,175.9 million yen ($10.5 million) with an ordinary loss of 683.5 million yen ($6.1 million). Founded back in September 2014 by Kodai Kawase, Photosynth aims to allow people to gain access to spaces without carrying physical keys. They have developed IoT-based connected smart locks and a cloud-based authentication platform, offering them to…

Photostynth CEO Kodai Kawase

Tokyo-based Photosynth, the Japanese startup developing and offering smart lock Akerun as well as cloud-based room-entry access control system, announced on Thursday that its application to list on the Tokyo Stock Exchange has been approved. The company will be listed on the TSE Mothers Market on November 5 with plans to offer 700,000 shares for public subscription and to sell 946,900 shares in over-allotment options for a total of 5,613,300 shares. The underwriting will be led by Daiwa Securities and Credit Suisse while Photosynth’s ticker code will be 4379.

Based on the estimated issue price of 1,500 yen (about $13.4), the company will be valued at 22.9 billion yen (about $204.2 million). Its share price range will be released on October 19 with bookbuilding scheduled to start on October 20 and pricing on October 26. According to the consolidated statement as of December 2020, they posted revenue of 1,175.9 million yen ($10.5 million) with an ordinary loss of 683.5 million yen ($6.1 million).

Founded back in September 2014 by Kodai Kawase, Photosynth aims to allow people to gain access to spaces without carrying physical keys. They have developed IoT-based connected smart locks and a cloud-based authentication platform, offering them to users based on a subscription basis.

Last year, the company introduced the Akerun Access Intelligence, an access authentication platform to realize a keyless society, as well as a new service called the Akerun visitor management system. In this scheme, users can associate their unique identity used in real life, such as NFC transit card, smartphone, employee ID and entrance pass with their digital entity such as e-mail address and phone number, and then register all them in to the cloud. This allows users to gain access to various spaces such as their office, building and home with just a single ID.

The company won the grand prize at the JR East Startup Program, a startup accelerator program by Japan’s largest railway company, with a system offering access control for the entry to office buildings using JR’s Suica NFC transit card. They established a joint venture with Japanese leading lock and security company Miwa Lock in January.

Led by CEO Kawase (18.35%), the company’s major shareholders include Globis Capital Partners (9.81%), Norinchukin Bank (7.45%), Jafco (5.47%), Fidelity Funds (4.34%), Globis Fund (4.19%), Daiwa Corporate Investment (4.18%), Gaiax (3.82%), Tokyo Metropolitan Government (3.48%), Fidelity Japan Trust (3.10%), and Executive Vice President Hiroaki Uesaka (2.65%).

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Japan’s Incubate Fund launches $147M fund for growth-stage startups

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Tokyo-based VC firm Incubate Fund announced on Tuesday that it has established a new growth fund called IFGO worth 16.1 billion yen (about $147 million). This is the sixth flagship fund for the firm since its first fund established in 2010 (excluding regional funds and franchise funds in India, the US, and Brazil). With the launch of the new fund, Incubate Fund’s AUM (assets under management) has reached approximately 62 billion yen (about $567 million). Focusing on follow-on investments in their more than 400 portfolio companies, the firm will start investing in middle- and later-stage startups. The firm has been focused on investing in early-stage startups, especially those in seed to series B rounds. When a promising startup in need of funding came to the firm but they are in the middle or later stage, the firm may have experienced to decline the startup’s request due to scope mismatch. In an interview with Bridge, Masahiko Honma, the firm’s founder and managing partner says, the new fund is to actively invest in the firm’s portfolio startups preparing for IPO and help them become unicorns. The fund’s ticket size is expected to be 500 million to 2.5 billion yen (about $4.6 million…

Image credit: Incubate Fund

Tokyo-based VC firm Incubate Fund announced on Tuesday that it has established a new growth fund called IFGO worth 16.1 billion yen (about $147 million). This is the sixth flagship fund for the firm since its first fund established in 2010 (excluding regional funds and franchise funds in India, the US, and Brazil). With the launch of the new fund, Incubate Fund’s AUM (assets under management) has reached approximately 62 billion yen (about $567 million). Focusing on follow-on investments in their more than 400 portfolio companies, the firm will start investing in middle- and later-stage startups.

The firm has been focused on investing in early-stage startups, especially those in seed to series B rounds. When a promising startup in need of funding came to the firm but they are in the middle or later stage, the firm may have experienced to decline the startup’s request due to scope mismatch. In an interview with Bridge, Masahiko Honma, the firm’s founder and managing partner says, the new fund is to actively invest in the firm’s portfolio startups preparing for IPO and help them become unicorns.

Image credit: Incubate Fund

The fund’s ticket size is expected to be 500 million to 2.5 billion yen (about $4.6 million to 22.8 million), aiming to actively lead pre-IPO rounds. If it is possible for middle- and later-stage startups to secure billions of yen in their pre-IPO round, they will no longer have to rush into an IPO but will be able to gain sufficient profitability, recognition, an appropriate valuation before it. The Japanese market used to be ridiculed for having many small IPOs compared to the U.S. and other countries, but the recent emergence of growth funds and large funds in Japan may help resolve these issues.

The firm also disclosed some of the investees from the new fund: ispace (lunar development), BellFace (online sales SaaS), Wovn (website multilingualization solution), Timers (parenting app development), Caster (online secretary and assistant), and Satori (marketing automation tool developer). Since all these startups have won a certain level of recognition from the market, there’s no doubt if any of them has started countdown to an IPO.

Image credit: Incubate Fund

About 57% of the new fund is backed by financial institutions and university foundations from North America, Hong Kong, and Singapore. Honma says there may be two main reasons behind the fact. First, the firm proactively disclosed their track records, sharing their performance to date in terms of DPI (Distributions to Paid in Capital) with potential investors, which helped gain the latter’s great understanding.

Secondly, geopolitical trends have also had a significant impact on the market. Due to the offensive between the U.S. and Chinese governments, as well as the restrictions imposed by the Chinese government, China’s big tech market is becoming increasingly suspicious. Even though we don’t know much about the inner workings of the market, the world’s money, with its huge appetite for consumption and expectations of speculative growth, is losing its way here. The Japanese market has been attracting attention because of its moderate market size, stable politics and economy, and steady real returns.

Honma says,

I have wanted to launch such a fund for a long time. Asked about why we could do it at this time this year, I think it’s significantly triggered by the momentum.

Incubate Fund has a strong presence in Japan, but I had a strong impression that they are pouring money from Japanese investors into promising startups in Southeast Asia, as Homma is based out of Singapore and they have invested in KK Fund other funds in the region. With the launch of the new fund, a two-way money flow will be created where funds from overseas will be invested in Japanese startups, which will benefit their international business expansion in the future.

Since the beginning of this year, Japanese independent VC firms have launched a series of large funds worth over 10 billion yen (about $9.1 million): One Capital closed its first fund with 16 billion yen while University of Tokyo Edge Capital Partners (UTEC) launched its 30 billion yen fifth fund. Coral Capital launched its third fund worth 14 billion yen, revealing that a third of its investors are from overseas.

Japan curated news app SmartNews secures $230M in series F at $2B valuation

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SmartNews announced on Wednesday that it has raised US$230 million in a Series F round. This brings the company’s total amount raised to date to over US$400 million, and its valuation up to US$2 billion, the highest for a single news app, securing its “double unicorn” status. This follows the close of their previous series E round announced 22 months ago. Participating investors in this round include Princeville Capital and Woodline Partners from the US, JIC Venture Growth Investments, Green Co-Invest Investment, and Yamauchi No.10 Family Office (by Nintendo founder’s family) from Japan in addition to existing investors like ACA Investments and SMBC Venture Capital. According to AppAnnie’s monthly average usage of mobile apps for iOS and Android in the U.S., SmartNews ranked first with 4.7 hours, followed by FlipBoard (4.5 hours) in the second as well as Google News (2.9 hours) and Apple News (0.8 hours). Futhermore, the number of monthly active users has doubled since 2019 (as of 2019, the total number of users in the US and Japan was 20 million). SmartNews plans to use the additional funding to double its headcount in the U.S. (currently 500 staffers globally) and add engineers and leaders, especially in Silicon…

SmartNews announced on Wednesday that it has raised US$230 million in a Series F round. This brings the company’s total amount raised to date to over US$400 million, and its valuation up to US$2 billion, the highest for a single news app, securing its “double unicorn” status. This follows the close of their previous series E round announced 22 months ago.

Participating investors in this round include Princeville Capital and Woodline Partners from the US, JIC Venture Growth Investments, Green Co-Invest Investment, and Yamauchi No.10 Family Office (by Nintendo founder’s family) from Japan in addition to existing investors like ACA Investments and SMBC Venture Capital.

According to AppAnnie’s monthly average usage of mobile apps for iOS and Android in the U.S., SmartNews ranked first with 4.7 hours, followed by FlipBoard (4.5 hours) in the second as well as Google News (2.9 hours) and Apple News (0.8 hours). Futhermore, the number of monthly active users has doubled since 2019 (as of 2019, the total number of users in the US and Japan was 20 million).

SmartNews plans to use the additional funding to double its headcount in the U.S. (currently 500 staffers globally) and add engineers and leaders, especially in Silicon Valley, New York, and San Francisco. The company will also expand its dashboard on the COVID-19 vaccine and its “News From All Sides” feature which gives users easy access to a wide range of political views.

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