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DELIGHT VENTURES: FOSTERING INTERNAL INNOVATION IN JAPAN
BY SILICON FOUNDRY
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INTERNAL INNOVATION CAN BE CHALLENGING FOR LEGACY COMPANIES—ESPECIALLY IN JAPAN, WHERE THE BUSINESS ENVIRONMENT IS DOMINATED BY INTERCONNECTED CORPORATIONS KNOWN AS KEIRETSUS AND WORKPLACE CULTURE HAS HISTORICALLY ENCOURAGED CAREER-LONG ALLEGIANCE TO A SINGLE EMPLOYER.
“JAPAN IS THE ONLY COUNTRY IN THE WORLD WHERE THE VAST MAJORITY OF LARGE COMPANIES SYSTEMATICALLY AND SIMULTANEOUSLY HIRE BATCHES OF COLLEGE GRADS EN MASSE EVERY YEAR AND HAVE THEM GO THROUGH ELABORATE TRAINING PROGRAMS, ASSUMING THEY WILL STICK WITH THE COMPANY UNTIL THEY RETIRE,” EXPLAINED DAI WATANABE, CO-FOUNDER AND MANAGING PARTNER OF DELIGHT VENTURES. “THIS YEARLY SYSTEM, AND THE SOCIAL EXPECTATIONS IT CREATES, MAKES THE JAPANESE TALENT MARKET IMMOBILE, WHICH IN TURN DISCOURAGES ENTREPRENEURSHIP AND HEALTHY STARTUP GROWTH.”
WATANABE AND HIS COLLEAGUES AT DELIGHT VENTURES ARE WORKING TO CHANGE THAT.
DELIGHT VENTURES IS A JPY10B (USD100M) VENTURE FUND THAT INVESTS IN AND INCUBATES EARLY-STAGE BUSINESSES. IT WAS STARTED IN 2019 BY DENA, A JAPANESE TECHNOLOGY CONGLOMERATE THAT DEVELOPS AND OPERATES A BROAD RANGE OF MOBILE AND ONLINE SERVICES INCLUDING MOBILE GAMES, E-COMMERCE, AND ENTERTAINMENT CONTENT DISTRIBUTION. DENA HAS EVEN DIVERSIFIED ITS HOLDINGS INTO LIFE SCIENCES APPLICATIONS AND OWNS PROFESSIONAL BASEBALL AND BASKETBALL SPORTS TEAMS. DELIGHT VENTURES IS STRUCTURED AS AN INDEPENDENT IDENTITY SO THAT STARTUPS CAN BE CONFIDENT THERE WON’T BE ANY CONFLICTS OF INTEREST WITH DENA’S EXISTING BUSINESS LINES.
“Delight Ventures’ key deal source is from DeNA, as one of our priorities is to encourage innovation from our existing and former employees,” Watanabe said. “DeNA encourages its top talent and those employees with entrepreneurial aspirations to test out their ideas with the company’s support and eventually spin them out as separate companies (not as new business lines owned by DeNA).”
Delight Ventures takes minority shares in its portfolio companies, Watanabe explained, which can then operate with the degrees of freedom that any other stand-alone start-up would enjoy, including seeking future funding from other external sources.
The decision to keep Delight Ventures independent is in keeping with DeNA’s well-known legacy of entrepreneurship and history of fostering an environment of internal innovation. DeNA was founded in 1999 by Tomoko Namba, a former McKinsey consultant and Harvard Business School graduate who saw an opportunity in online auctions.
“Very few consultants from McKinsey started companies at that time. And there are very few women entrepreneurs. I thought I would be able to do well because I was giving advice to CEOs,” Namba told the BBC in a 2013 interview. “I thought I would be able to do far better. But…I made every single mistake I could think of.”
It took four years for DeNA to become profitable. Dai Watanabe was along for the ride. He joined the company shortly after its founding, when it was a pre-IPO startup growing its team from a headcount of thirty to one hundred. Watanabe was involved in launching and monetizing its online and mobile e-commerce businesses. “Although these various initiatives are no longer what DeNA is known for, their success eventually led the company to go public in 2005,” he explained. Watanabe worked in numerous roles across DeNA: in 2006, he started a team in China designed to replicate DeNA’s success in Japan. It was a challenging task, even as DeNA secured a leading position in Japan’s mobile internet market with Mobage, its mobile gaming and social networking service. In 2008, Watanabe moved to the Bay Area to bring Mobage to the U.S. market and launch a game development business. “Although DeNA invested hundreds of millions of dollars into our U.S. expansion, the rise of the iOS and Android platforms ultimately disrupted our business,” he explained. In 2016, DeNA closed its studios in North and South America. Though the same disruption happened in Japan, DeNA was able to successfully diversify its portfolio and maintain its position as a leading Japanese company. “I’ve been part of several initiatives that ultimately had to be shut down,” Watanabe reflected. “I am proud of having contributed to the company’s early success and for my role in helping our recently launched businesses learn from our previous failures.” After the closure of DeNA’s North American studio, Watanabe remained in the Bay Area, supporting multiple business units in identifying and exploring partnerships, research, and investment in the West. He helped DeNA’s teams in Japan stay abreast of new trends and innovations and supported key initiatives by building relationships with U.S. startups, corporates, investors, and service providers.
As part of that work, DeNA partnered with Silicon Foundry, an innovation advisory platform that builds bridges between leading multinational corporations and global startup ecosystems, to facilitate digital transformation initiatives for its various business lines. In 2019, Silicon Foundry supported and served as a thought partner to Dai in designing Delight Ventures’ business model, ensuring it mirrored best practices based on the teams’ own experience and representative venture studios from around the world.
Today, Silicon Foundry works with Delight Ventures to explore new investment opportunities, support current portfolio company activities, continue to advise on best practices in venture studio operations, and provide insights into the political and regulatory environment that facilitates entrepreneurship growth in the U.S.
“DeNA’s spirit of innovation made Delight Ventures possible—and now Dai and his colleagues are inspiring a new generation of Japanese entrepreneurs,” said Neal Hansch, Silicon Foundry CEO. “We’re honored to do our part to help build that ecosystem and forge bidirectional connections with Silicon Valley.”
Delight Ventures’ portfolio companies include IoT home devices company Nature, enterprise collaboration platform BeaTrust, snack subscription service snaq.me, and artwork rental platform Casie, among others. Watanabe is excited to help the ecosystem continue to grow. “I am 100% certain that we will see an explosion of entrepreneurship as our society evolves, much as we saw it happen in France, Germany, and many other countries,” Watanabe reflected. “There is no reason to think that Japan’s native entrepreneurial talent is lacking compared to other countries; there just isn’t enough resources or support in place to make aspiring founders comfortable enough to take the risk! Hopefully, Delight Ventures will be able to make progress on this front and help lead the charge on growing our innovation ecosystem.”
