Japan has long gone its own way when it comes to technology, even inspiring its own term “Galapagos Syndrome” for products and services that thrive at home but go nowhere abroad. Now the country’s corporate giants fear they may miss out on another wave of technology and are writing big checks to ensure they don’t.
On Tuesday, Pegasus Tech Ventures, a Silicon Valley-based investor, said it will quadruple to $200 million the corporate venture fund it manages for Japanet, one of Japan’s largest mail order and television shopping networks. This follows a previous decision by Auto supplier Aisin to double its Pegasus-managed fund to $100 million.
This is the latest sign that traditional Japanese companies, long seen as digital transformation laggards, are looking to take advantage of the AI boom. “They sweat,” says Anis Uzzaman, the founder and CEO of Pegasus Assets. “They know that the AI revolution is happening. They are behind the US and the Europeans in introducing it.”
Pegasus offers what it calls “venture capital-as-a-service” by managing corporate venture capital for large companies, primarily in Asia, and connecting them with startups that its customers would struggle to reach on their own.
“Companies are being held back by their current research and development and are looking for ways to innovate faster to keep up with the rest of the world,” says Uzzaman. “One way to do that is to work with good startups, but they don’t know how to reach them.” There’s also the language barrier: most Japanese companies work in the local language, which can isolate them from English-language materials in Silicon Valley.
Japan’s spending on AI infrastructure is expected to increase exceed the $5.5 billion mark this yearaccording to a forecast from International Data Corporation. And there are more investments to come: Microsoft pledged to spend money on April 3rd another $10 billion on Japan’s AI infrastructure over the next four years.
From a Nagasaki Stadium to OpenAI
Founded in 1986, Japanet is one of Japan’s largest mail order networks, similar to QVC in the United States. The company also recently embarked on an ambitious diversification program, adding a travel and cruise business and professional sports teams.
Originally, Japanet was looking for technology that it could bring back to its home base in Nagasaki and use in the city’s new soccer stadium.
“When they said, ‘We need a security system for the stadium,’ we looked at every relevant security system startup and found the ones that would fit their stadium,” says Uzzaman. “They were able to trust this company, make some investments and then integrate the technology into the stadium.”
This initial success led Japanet to consider further frontier projects, towards companies such as SpaceX, OpenAI and Anthropic. “These companies are growing at a rate we have never seen in the venture capital industry,” says Uzzaman.
“We are pleased to continue using this fund to search for the world’s newest technologies and create new values that bring more joy and enrichment to our customers’ everyday lives,” Japanet Group President Akito Takata said in a statement announcing the fund’s expansion.
CVCs on the rise in Japan
Corporate venture capital is now an important part of the start-up economy, with corporate funds participating in a large proportion of global financing rounds.
Founded in 2011, Pegasus has invested in nearly 300 startups with 76 exits, including 25 IPOs. It manages around $2 billion in assets. His clients include video game publishers Sega and Bandai Namco; Taiwanese PC maker Asus; Japanese trading house Sojitz; US refinery Marathon Petroleum; and snack maker Calbee. Companies provide the majority of the capital; For compliance reasons, Pegasus contributes a nominal share and manages the investments.
Japan’s outsized presence in Pegasus’ customer base is due in part to the fact that Uzzaman himself is from the country, growing up and going to school there.
But there are also structural reasons, such as Japan’s declining population and a shrinking working-age population. “Many Japanese companies come to us and say that they don’t have enough people in manufacturing or factories, so they ask for physical AI, robotics and automation solutions,” explains Uzzaman.
Still, many of the interesting innovations, at least according to Pegasus, are happening in the US. Uzzaman says about 70% of Pegasus investments go to startups in the US and Europe.
