Silicon Valley VC Returns to Japan to Form $300 Million Fund

Gen Isayama grew up in Tokyo and then spent a decade working in the venture-capital business in northern California. Now he’s starting a $300 million fund aimed at blending the best of Silicon Valley and Japan.

The 40-year-old is chief executive officer of WiL LLC, which has tapped corporate investors including Sony Corp., Nissan Motor Co. and ANA Holdings Inc. to help finance its investments. The firm plans to fund startups in Japan and technologies within the country’s established companies that have the potential to be standalone businesses, he said.

WiL’s approach is unusual in an industry dominated by Silicon Valley firms that tend to steer clear of big corporations that could slow them down in the hunt for breakthrough innovations. Isayama sees an opportunity in giving Japanese companies a chance to commercialize technologies that may not otherwise get attention. He plans to present his first potential investment targets to sponsors today at WiL’s Tokyo office.

“We said, ‘How can we unlock the asset sitting inside of, say, Sony, which will never get productized or just sits there as a patent or a prototype product?’,” Isayama said in an interview in Tokyo. “That was the concept last summer when I left the previous job.”

The graduate of Tokyo University left his native Japan to get an MBA at Stanford University in Palo Alto, California, in the heart of Silicon Valley. After that, he joined Doll Capital Management Inc., eventually becoming a partner.

Change Catalyst

Tokyo-based Sony invested in the fund in December, Mami Imada, a spokeswoman, said, declining to specify the amount.

“We empathize with the gist of promotion, open innovation and incubation,” Imada said.

Innovation Network Corp. of Japan will invest as much as $100 million in WiL’s fund, the state-backed investment fund said earlier this month.

“This fund has the potential to offer creative collaboration, opportunities to interact with entrepreneurs, and access to new technologies in the future,” said Chris Keeffe, a Nissan spokesman.

WiL plans to act as a catalyst to trigger changes to Japanese companies such as Sony and Nissan. Sponsor companies are invited to join weekly and monthly meetings to discuss joint venture plans, potential investment targets or spin-out projects, said Isayama.

Golf Caddy

The fund may also invest in later-stage U.S. ventures seeking to enter Japan. The venture capitalist, who lives with his wife and four children in California, wants to connect businesses in the two nations, said Isayama, who occasionally caddies for his 10-year-old son who plays golf.

Isayama worked for former Industrial Bank of Japan, which is part of Mizuho Financial Group Inc., before moving to California, where he found his entrepreneur spirit. “Living and breathing the air of entrepreneurship really changes your life.”

Investments in Japanese startup companies totaled 102.6 billion yen ($1 billion) in the year ended March last year, down from 193.3 billion yen five years ago, according to Venture Enterprise Center, a Tokyo-based industry group.

Big companies can play an important role in fostering startups in the world’s third-largest economy, said Nobuyuki Idei, the former Sony chief executive officer who helped Isayama promote his fund.

No Angels

“We don’t have angel investors here, but big corporations can play the role of providing long, patient risk money,” Idei said in an interview.

Idei runs Quantum Leaps Corp., a consulting company he started in 2006.

Japan Prime Minister Shinzo Abe is setting a new rule providing tax benefits for companies that invest in venture-capital funds, Isayama said. Japanese companies’ cash holdings rose to a record of 224 trillion yen, highlighting Abe’s struggle to spur investment to end a 15-year deflationary malaise.

“Japan companies are too rich, not just in terms of money, but in human resource and technology,” Isayama said. “These three elements that can drive businesses are somewhat isolated at big companies.”

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