Mawson: How long has Transcosmos been active in corporate venturing?
Nagakura: The company has been doing internet deals since 1995.
Mawson: Why?
Nagakura: Transcosmos is a public company in Tokyo, 40 years old but where the family still owns a majority, 53%.
The founder [Koki Okuda] is 75 and does not use emails but his son is president and 43. When the son [Masataka Okuda] was younger he knew he would take over the company and wanted to do something different with it.
He was in Silicon Valley in 1993 to 1994 and saw the birth of the internet and became obsessed in it as art rather than business. With Real Networks he realised internet devices could be credible TVs and radios.
It was too early but fortunately he is the son of a rich guy who runs the company so he flew to Seattle from the Valley and met Real Networks and offered to sell its services in Japan. He did very well out of the deal as an $8m investment pre-Real’s IPO became worth $500m to $1bn on paper.
In some senses it was coincidence or lucky but desire to be involved in the internet was also there so it was not 100% luck. He had a good idea at the right time and a good sense of the future. This one shot gave a good idea of what the internet could become, so the internet became not a toy but the future of Transcosmos and the company started heavy investment in 1997 and unlike other companies with an analytical approach, Transcosmos was aggressive, which is a competitive advantage against other Japanese companies.
Transcosmos sold half its shares in Real at good levels and the rest in 2002 and 2003 after the implosion.
Mawson: What has been your worst investment?
Nagakura: Ask. Transcosmos set up Ask Japan and invested nearly $100m over five years before shutting it down last year with not even a 1% market share.
Mawson: How much has Transcosmos invested in aggregate?
Nagakura: About $500m in 120 deals, such as CyberSource where we owned 4.9% and Visa bought it. The investment team is me and three senior people and 10 in the US and 20 in Japan, but almost all our deals have been in the US. We were very defensive between 2007 and 2009 with no new investments, although we retained the portfolio. Zynga bought one of our Japanese companies and paid in its stock.
Mawson: What has such corporate venturing meant for Transcosmos?
Nagakura: The internet makes up about 30% of our revenues, or $1.75bn, with ebitda [earnings before interest, tax, depreciation and amoritsation] of 10%. We do outsourcing and call centres and internet advertising, such as DoubleClick. We have the largest web creation team, NetRatings, in which Nielsen owns 40%, and Coremetrics, where Transcosmos is the reseller even after IBM bought it
Mawson: What is the future?
Nagakura: We started to do deals again this yar and in the next 12 months will look to complete three and two bolt-ons to existing portfolios. As a family-run company we have more freedom. If they like it, it is a done deal. We typically invest $1m to $10m. Japanese companies are more interested in corporate venturing where they are run by the owner
Transcosmos Investments:
Year Deals Exits
1996 6 2
1997 1 0
1998 7 2
1999 55 15
2000 55 6
2001 – 2
2002 – 0
2003 1 2
2004 2 1
2005 8 0
2006 7 0
2007 3 2
2008 1 1
2009 0 2
2010 1 3
Company – Seed/Early
Become.com
Pheedo
Donnerwood Media
Hipcast (Audioblog)
Buzznet
Multiply – sold to Naspers/MIH September 2010
Revcube
edgeio
SingShot Media – sold to Electronic Arts February 2007
WangYou
Skysoft
6rooms – sold to founder July 2010
Buzzlogic
Mid stage:
InfoGate – sold to AOL
Hipbone – sold to Kana
Optimost – sold to Interwoven 2007 (now Autonomy)
Brightcove
Eurekster
Zazzle
Zynga
Late stage:
Loudeye
CinemaNow – sold to Sonic Solutions November 2008
Coremetrics – sold to IBM August 2010