Gen Tsuchikawa is chief executive and chief investment officer of Sony Ventures, which was first established in 2016.
Its first fund, the Sony Innovation Fund, was focused on early-stage technologies and was funded from Sony’s balance sheet. Tsuchikawa, a long-term veteran of the Japan-headquartered technology conglomerate, had previously been running the group’s mergers and acquisitions and had little experience of startup investing. Seven years later, Tsuchikawa and his team has made more than 150 investments.
The organisation has become so successful with his approach that Sony Ventures launched a third fund in February, SonyInnovation Fund 3 (SIF3), which brings in external companies as limited partners. This ¥26.5bn ($209m) fund includes MitsubishiReal Estate, Kawasaki Heavy Industry and Koei-Tecmo as investors.
Sony had already tried a more independent structure with its second fund, Innovation Growth Fund, which is run as a joint venture with Daiwa Securities, the Japanese financial institution, and invests in mid-to-late-stage companies. But with the new SIF3 fund, Sony Ventures is going fully into a GP/LP structure on its own.
“In a sense, we are going beyond the CVC definition and doing the fund business,” says Tsuchikawa.
With this comes an increased pressure to generate financial returns, as well as strategic ones, he says.
With the launch of the third fund, Sony Ventures has more than $500m under management. It has a 30-person team, who have mostly been recruited internally.
“The core force is from the internal teams,” says Tsuchikawa. Given that one of the biggest challenges of any corporate venture team is to win the trust and acceptance of the parent company, building a team with company insiders is useful, he says.
Beyond that, building a team is about bringing in the right mix of skills between those who are good at networking with startups and those who are good at executing deals.
Around 40% of Sony Innovation Fund’s portfolio companies have discussed some form of collaboration with Sony. Often it is the portfolio companies themselves that are keenest to pursue a joint project.
Around 40% of Sony Innovation Fund’s portfolio companies have discussed some form of collaboration with Sony, Tsuchikawa says. But working together with Sony is not a prerequisite for doing a deal.
“We never force anything,” Tsuchikawa says. Often it is the portfolio companies themselves that are keenest to pursue a joint project with the electronics and entertainment brand.
Sony continues to invest in early-stage companies through that first balance sheet-based fund. The second and third funds, however, have allowed it to take stakes in later-stage companies.
“As time progressed, we felt the strong need and desire to get into more C, D and sometimes unicorn rounds,” says Tsuchikawa.
The latest fund will focus on healthtech, fintech and entertainment. Entertainment is a natural focus for a brand, with a huge presence in music, movies and video games, while healthtech and fintech can build on this area of expertise – such as apps and games that can help with mental health. For example, earlier this year, Sony Ventures invested in Peppy, a digital platform for fertility and menopause-related healthcare advice.
Other recent investments by the fund include a stake in Lokal, an India-based local language social media application and a stake in Illumix, a Silicon Valley-based company creating Pokemon Go-style augmented reality experiences that could be used to make sports and music events more immersive for people. The team also invested in Waffle, a consumer insurtech company spun out of MIT, which helps people insure the virtual goods they have bought in online games.
Sony Ventures has scored a few good exits from the portfolio in recent years, including the IPO of carbon-neutral biofuels company Green Earth Institute and Japan’s SmartCar, and the acquisition of live streaming platform Mobcrush by gaming company Super League.