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Japan Ranked First in the Number of Innovation Outposts in Silicon Valley

(USA)
From San Francisco
October 15, 2019

Mind the Bridge (“MTB”), an innovation advisory firm based in San Francisco, has released a research report on companies engaged in innovation activities in the Bay Area*1 on September 25. The subjects of the research include large companies listed in Forbes Global 2000*2 and Fortune Global 500*3. The report reveals that many companies, especially large ones, are actively investing in technology. For example, 77% of Fortune 100*4 companies are investing in venture capital and 52% of Fortune 100 companies are having their own Corporate Venture Capital (CVC) funds.

It also shows that of the 222 companies with innovation base office*5 in the Bay Area, 52 are Japanese companies, accounting for about 25% of the total. Japan ranked first followed by the US (39 companies), France (22 companies), and Germany (20 companies) (see Figure 1).

Fig. 1 Number of companies with innovation outposts in Bay Area (by country)

This graph describes the number of companies with innovation outposts in Bay Area, San Francisco. Japan has the most. The number is 52. The United States follows. It has 39 outposts there. France and Germany follows and the number is 22 and 20.

Note: US companies above exclude those hNote: US companies above exclude those headquartered in the Bay Area.eadquartered in the Bay Area.

Source: Mind the Bridge

Since 2015, when the overseas expansion of major Japanese companies began increasing, their objective has been information gathering, and cooperation with startups has not progressed. Factors for such situation are said to be differences in corporate culture between large companies and startups as well as discrepancies in the level of awareness between the companies’ innovation Base place and headquarters. Recently, however, it seems that activities of Japanese companies are not merely information gathering but are changing to investments and contracts that involve their headquarters.

According to the MTB report, among foreign investor countries into the Bay Area (2015–2018), Japanese CVCs ranked first in deal size with a total deal value of $ 24.9 billion, overtaking China ($ 16 billion) and Germany ($ 5.8 billion) (see Figure 2). Large-scale investments such as SoftBank's investment in Uber Technologies are likely to be the main force in achieving the deal value, but Japan also topped the ranking in the number of deals closed with 202 deals, surpassing China (158 deals) and the UK (90 deals) (see Figure 3). The research shows that Japanese companies have the largest presence in the Bay Area among the companies investing in startups as a means of collaborating with them.

Fig. 2 Investment amount in startups in Bay Area (2015–2018, by country/region, excl. US)

This graph describes the investment amount in startups in Bay Area from 2015 to 2018. Japan invest the most and the amount is 24.9 billion USD. China follows with the amount of 16 billion USD. Germany and Russia are the next position and their invest amount is both 5.8 billion USD.

Source: Mind the Bridge, PitchBook

Fig. 3 Number of investment deals with startups in Bay Area (2015–2018, by country, excl. US)

This graph describes the number of investment deals with startups in Bay Area from 2015 to 2018. The country that invested most is Japan with 202 deals. China follows it with 158 deals. The next positions are UK (90), Germany (80), South Korea (79).

Source: Mind the Bridge, PitchBook

*1 A generic term for the area around the San Francisco Bay, which includes its suburban cities, such as San Francisco and Silicon Valley. The area includes San Francisco, San Mateo, Santa Clara, Alameda, and part of Santa Cruz. *2 The world's top 2,000 companies based on sales, profit, assets, and market capitalization ranked by Forbes magazine. *3 The world's top 500 companies based on sales ranked by Fortune magazine. *4 The top 100 US companies based on sales ranked by Fortune magazine. *5 Innovation laboratory to collect information on the local business ecosystem as well as startup incubation, acceleration includes facilities for strategic collaboration, research and development (R & D) centers for prototypes and researchers, and corporate venture capital (CVC) offices with investment functions. Base that have at least one full-time representative for innovation purposes.

(TARUTANI Noriya)