Cerevo to set up $20M fund to accelerate Japan’s hardware startup ecosystem

From the left: Takuma Iwasa, Osamu Ogasahara

See the original story in Japanese, part of our coverage of the Infinity Ventures Summit Sapporo 2014.

Tokyo-based Cerevo, the Japanese startup best known for its Cerevo Cam and IoT crowdfunding site Cerevo Dash, announced today that it will invite Osamu Ogasahara to the company’s board pending approval at their board meeting on June 2nd.

We had a chance to speak with the company’s co-founder and CEO Takuma Iwasa, as well as Ogasahara, at the Infinity Ventures Summit 2014 happening right now in Sapporo, Japan. Ogasahara is the co-founder of Japanese internet service provider Sakura Internet as well as owner for the popular entrepreneur hub Awabar and co-working space Nomad New’s Base [1].

The Bridge: Since it’s a complicated topic, would you like to clarify what’s happening with your company right now?

Iwasa: Sure. As we published on our blog, Ogasahara will join our board pending approval at our board meeting on June 2nd. Shares of our company held by Inspire Technology Innovation Fund, Neostella Capital, Voyage Ventures, and Inova [2] will be handed over to Ogasahara. We’re also planning a big funding round as well.

The Bridge: Your company has developed consumer electronics like Cerevo Cam and enterprise hardware like LiveShell. How does the funding and the change of the board member influence your plans?

Iwasa: First, we’ll step up marketing of our brand and accelerate global expansion. Second, we’ll have an incubation project focused on hardware startups.

The Bridge: Your business heavily depends on international sales, right?

Iwasa: Yes, some of our products receive over 40% of all orders from overseas. We will try to raise this to 80%. We also plan to expand our range of products, especially in the IoT and ‘high amateur’ spaces.

The Bridge: What do you mean when you say ‘high amateur’ space?

Iwasa: It’s difficult to explain since it’s a relatively new concept. It means a series of products ranging in a space where professional and hobbyist use overlap. Our video and still camera products are categorized there.

I know the market can grow explosively where low-end products for professional use and high-end products for hobbyist use intersect. That’s what I mean by ‘high amateur’ space. It’s not a huge market because it targets a niche. Successful examples in this area include DJI’s Phantom 2 and GoPro.

The Bridge: Your company is a 10-person team but we heard you’re planning to enlarge it to about four times that.

Iwasa: We’re planning to increase our head count up to 50. Our strategy is to target niche markets and produce a variety of products. […] We think our business is scalable as long as we have a sufficient number of talented people. We are hiring engineers in many fields like electrical engineering, design, mechatronics, app development, and infrastructure.

The Bridge: Let’s talk about the incubation project. Regarding the IoT fund you are planning, who will be in charge of forming this? We heard that Cerevo got money from an investment fund. Is that correct?

Ogasahara: I am the general partner of the fund. We’ll be forming a fund worth $20 million this coming summer, and will invest in Cerevo from that. It’s sort of like a growth fund that I was eager to raise money from when I founded my internet service provider company many years ago.

The Bridge: So you will invest not only in Cerevo but also in other hardware startups. You also have another investment initiative at ABBALab, where you have specifically invested in startups which have succeeded in raising money on crowdfunding sites. How are the funds different?

Ogasahara: For that initiative, we’ll keep seeking young entrepreneurs and help them create prototypes and launch their businesses in a hands-on manner. People are unlikely to create hardware products as easily as they would create smartphone apps. ABBALabs aims to remove the financial or environmental obstacles for ambitious entrepreneurs.

The Bridige: So what does Cerevo expect by launching this incubation business?

Iwasa: Our main focus is to help crowdfunding efforts in Japan and the rest of the world, and to help crowdfunding project owners manufacture their products. We’ll set up a garage and shared office in Akihabara, and we are also planning to organize hardware-focused workshops and hackathon events too.

Ogasahara: By giving knowledge of mass production to entrepreneurs who already succeeded in creating their products, we really want to eliminate barriers for them. I believe it can really help a lot of people.

Iwasa: Looking at posts on bulletin boards, you can see that many entrepreneurs succeed in raising money on Kickstarter, but many of them run into difficulties in mass production. But the biggest obstacle for them will come after production. We help them sell, we support them, and we encourage them to develop the next model of their product. This is where our experience can help.

Ogasahara: We’re running a site called DMM.make in partnership with The Bridge, as you know. This is also part of our effort to encourage businesses to create hardware products. We want to provide opportunities where people can learn, make, share, sell, and buy what they create.

Iwasa: So if you’re interested in this space but don’t know what to do, don’t hesitate to come and join us.

The Bridge: Thanks for your time.

  1. Disclosure: The Bridge has a business partnership with Nomad, the company that Ogasahara has managed. We are providing selected articles to DMM.make, a news curation site by Japanese internet company DMM. 
  2. Inova is a fund focused on investing in electronics manufacturing startups and was formed by three Japanese companies: Thine Electronics (TSE:6169), Chip One Stop (TSE:3343), and Ant Capital Partners.