Internet company DeNA does not consider venture capital fund Delight Ventures unit a pure corporate VC vehicle, Dai Watanabe, a managing partner for Delight, told Global Corporate Venturing.
“Its structure combines the strategic benefits of a CVC arm for the parent organisation and the advantages of an independent VC fund,” Watanabe said. “In other words, despite having DeNA itself as a single limited partner, investment decisions and so on will be made by a team independent of the corporate.
“Independent partners who do not belong to DeNA will participate by way of capital contribution and carried interest, sharing the losses and gains generated by entrepreneurs and co-investors.”
Delight Ventures was formed in July, at a point where the startup scene in Japan has matured, and a time when the country’s venture investments have increased over the past decade.
However, Watanabe was quick to point out that Japanese VC investments as a proportion of GDP remains half that of France, a third compared to Canada, a seventh compared to China and a ninth of that in the US.
He added that Japan is positioned among the most difficult places to launch a startup, according to information gathered by several research institutes.
“As a tradition, many Japanese companies employ large numbers of university graduates each year,” he said. “The country also runs a fully-fledged education system assuming citizens’ life-long employment by a single organisation. As many young people are designing their life based on that system, it is difficult for entrepreneurship to be a viable option.”
Nevertheless, DeNA prides itself in maintaining an agile and capable workforce who have graduated from top universities or hailed from top corporations in the country.
Watanabe said Delight Ventures aims to leverage DeNA’s talent and corporate culture as assets, and contribute to the development of the Japanese entrepreneurship culture.
“We do not make investments that are conditional on strategic partnerships or that sacrifice the startups’ strategic options,” he said, adding: “On a deal basis, we do not emphasise DeNA’ s strategic returns but pursue only financial returns.”
DeNA remains a major deal source for Delight Ventures according to Watanabe. “Most of the new business development activities conducted at DeNA will be transferred to the Venture Builder program under Delight Ventures, while those that benefit from DeNA’s resources and know-how will be directed towards spinouts and capital gains.”
DeNA also provides capital and entrepreneurial talent to Delight Ventures, and it is possible that many of the portfolio companies’ founders may spring from within the corporate itself.
“Delight Ventures encourages, backs and supports DeNA employees,” Watanabe said. “By doing so, we hope we can employ talented people with high entrepreneurial thinking that we did not have access to until now, or bring people with entrepreneurial experience on board as executives.
“DeNA’s business leaders and industry experts provide mentoring to startups. If portfolio companies would like, they also have the possibility of partnering DeNA’s different business units and allies from multiple industries.”
To facilitate the entrepreneurial initiatives, Delight Ventures focuses on deals from the very early stage to series A, including those in the ideation phase. Its investment areas are not restricted to any specific industry.
As an example, Watanabe mentioned one aspect of Japan’s salient social issues surrounding innovative technologies that might come in handy, its ageing population, adding: “In the fields of medical care, nursing care and insurance, I believe major innovations are expected to emerge from Japan. Otherwise, hot topics in the US and Europe are areas where tech innovation happens in Japan as well.”
DeNA can also help portfolio companies reach an exit, but Delight Ventures does not propose an investment contract in which DeNA is prioritised as a prospective buyer.
Regarding Delight’s plans going forward, Watanabe said: “The fund’s formation will be completed hopefully by the end of summer, but the selection of potential startups has already begun following the strategy I have explained. Before the actual formation of the fund, direct investments from DeNA itself will also be considered.”
Photo of Dai Watanabe courtesy of Delight Ventures.
