JETRO Global Connection -Accelerate Innovation with Japan-

Interview
UTokyo IPC -the Innovation Platform to Cultivate Startup Ecosystems around the University of Tokyo

(Japan)
November 18, 2022

UTokyo Innovation Platform Co., Ltd.External site: a new window will open. (UTokyo IPC for short) was founded in 2016 to encourage innovation for university-related startups. The name stands for the corporate identity that serves as the innovation platform for the University of Tokyo, its startups, and society as a whole. It works as a fully owned venture investment arm of the University of Tokyo that currently manages two funds. To learn more about UTokyo IPC, we spoke with Mikio Kawahara, Partner and Chief Investment Officer of IPC1 Fund, and Hideki Nagasaka, Director of the 1stRoundExternal site: a new window will open. (in Japanese only) Incubation Program, which supports the pre-seed phase.

UTokyo IPC’s funds are regarded as a public-private investment of the Japanese government. The initiative, in which four leading national universities, namely Tohoku, Tokyo, Kyoto and Osaka, are engaged, started around 10 years ago under the auspices of MEXT (the Ministry of Education, Culture, Sports, Science and Technology) and METI (the Ministry of Economy, Trade and Industry). Each university has set up and drives its own subsidiary venture capital arm, which suits its circumstances.

Mikio Kawahara and Akiko Tsuchiya (Photographed by JETRO)

Startup Investment through Collaboration with VCs and Industry

Recognizing that global society has become more knowledge-intensive, the University of Tokyo has systematically supported academic environments to promote startup formation in Japan over the past two decades. Today, only the University of Tokyo has spawned more than 400 startups, primarily in the life sciences, hardware, AI, media, and space industries.

UTokyo IPC decided to employ diverse investment structures and approaches in its two funds. The IPC1 Fund was started in 2016 and supports startups primarily in their early to late stages while engaged with private VCs through fund investment. One of the characteristics of this fund is to combine LP investments with VC funds and direct co-investments to startups, thereby enlarging the depth and breadth of support capacities.

The newer AOI1 fund started in 2020 for pre-seed startups focuses on collaboration with industry. Based on the idea that the resources nurtured in industry will be great foundations to launch and develop startups especially in the deep tech fields, this fund makes investments in corporate spin-offs or startups working with companies.

Both funds operate on a 15-year term, and their fund size is a total of JPY 50 billion (approximately USD 350 million). More than 50 startups are in their portfolios —their businesses span diverse fields from life sciences and space industries, and some are based overseas. What they share is that they are leveraging university-nurtured expertise into business opportunities. So far, three portfolio startups have been listed on the Tokyo Stock Exchange.

Accelerating Startups from Scratch

In parallel to investments, UTokyo IPC has been running the 1stRound incubation program since 2017. Often, university startups don’t have access to certain building blocks needed to grow successfully, such as access to media or government agency connections. They may pitch to VCs, but they often start out disadvantaged with a low valuation, even if funded.

1stRound, an incubation program co-hosted by eight of Japan’s most prominent universities, aims to address these challenges academic startups often face. According to program director Hideki Nagasaka, “We select pre-seed university-related startups and mentor them for six months to get them ready to successfully achieve their first round of funding. We provide startups up to JPY 10 million (approximately USD 70,000) equity-free to jumpstart their business.”

Before startups can apply for the 1stRound Incubation Program, they are encouraged to go through development, deployment, and prototype creation. Potential users, collaborators and investors are invited into the selection process, creating a distinct, competitive selection process. The awardees are selected based on various criteria, including financial data, Scientific Integrity, and product market fit. Corporate partners and VCs make selections based on a startup's potential and strengths, regardless of the business sector.

Nineteen corporate partners and UtokyoIPC support and mentor 1stRound startups on key business strategies such as scaling and process management. Support is also provided for legal, tax, human resources, immigration, and visa matters. Companies are encouraged to grow not just the strength of their technology but also to grow and scale their operations.

The awarded startups are prepared for a successful launch through 1stRound's competitive selection combined with comprehensive support. Roughly 90% of 1stRound startups (60 in total) have been funded. The other 10% follow divergent pathways, for example, successfully developing their businesses through organic growth without raising capital. Several were later accepted into prestigious overseas accelerators, including StartX and Berkeley SKYDECK.

1stRound applicants additionally have access to the latest scientific developments at the co-hosting universities, and researchers with interesting outcomes are encouraged to apply. Even startups who are not selected can reapply to the program, so there is continuous improvement and development of the technology and commercialization processes. As Hideki Nagasaka says, "that's one of the secrets we have."

Exterior view of UTokyo IPC building(Photo provided by U Tokyo IPC)

Bridging Startups between Japan and the World

UTokyo IPC highly encourages startups to be “born global”. This perspective has been an important part of the growth of startups to have broader market access. For example, health tech startup Vesica, one of the 1stRound awardees, recognized a strong market fit for their services in the US and established a US company in partnership with UC San Diego. On the other hand, startups having their bases abroad are also accessing the ecosystem around the University of Tokyo. One of the UTokyo IPC portfolio companies, DEM Biopharma, Carbon Biosciences, Axial Therapeutics, and VividQ are examples of the UTokyo IPC portfolio companies.

UTokyo IPC is serving as a gateway between the ecosystem around the University of Tokyo and the world. “We are confident that our ecosystem will surely provide opportunities for industry as well as startups, regardless of their founding places. We are able to organize meetings with startups in our ecosystem and also invite new companies to do business in Japan,” says Mikio Kawahara. JETRO is also involved, working to connect tech startups with top-tier partners in overseas markets.

Report by:
IIMURA Toru, Innovation Promotion Department, JETRO
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