The search for strategic partners who bring innovative industrial technology
Hiroshi Nerima, Managing Partner, Nabtesco Technology Ventures
What kind of company is Nabtesco?
Nabtesco Corporation manufactures a wide range of industrial products:
- hydraulic gears for robotics
- brakes for trains and commercial vehicles
- control systems for the aerospace industry
- automatic doors for buildings
- and many others.
The applications are mostly very different, but the common element is motion control.
We are a B2B company, so we are not well known to the public, even in Japan, but we have very strong positioning in each market we operate in, and a very high market share in several sectors. For example, in hydraulic gears for robotics, we have more than 60 percent of the global market. We also supply actuator control systems for Boeing jetliners, including their 777 model.
As a public company, listed on the Tokyo Stock Exchange, we are always facing pressure from investors to be more profitable. To grow, we have to move into new markets, either geographically or by developing new kinds of technology. This is really challenging, so – like any other company in the world – we are always looking for new technology and new opportunities.
Today the solutions we are working on are highly dependent on software. And for many reasons, software development is done more efficiently by start-ups, which are highly ambitious and focused entirely on new technology. So we would like to find great start-ups to work with, in order to build a technology ecosystem that we can draw on. Only by creating such an ecosystem can we reach our strategic R&D goals. Nabtesco needs to do this in order to survive, and to maintain its success over the next few decades.
What are the most pressing technology needs that Nabtesco is looking to address?
Our top-priority targeted technologies right now are hydraulic gears, actuators, drive systems, additive manufacturing, tribological coatings, surface treatment, various types of sensors and computer vision, AI, and IoT. But to protect ourselves from disruptive technologies, we have to seek out technologies that are outside our existing development agenda. So we are also taking a longer view, and looking for new types of innovation outside our divisions’ existing business needs.
Why did you decide to locate Nabtesco Technology Ventures in Europe and not in the United States?
Of course Silicon Valley is the centre of software development. But development of the type of industrial applications we are looking for is much more advanced in Japan and Europe, while Silicon Valley is more focused on B2C, e-commerce, etc. That’s why I’m located in Zurich, and not on the West Coast.
Why did you choose Emerald Technology Ventures as a partner?
Emerald is a very corporate-friendly venture capital fund, which is not easy to find. Venture capital firms generally prefer to just focus on generating profits, and would rather not hear from the investors. That’s not what I was looking for. What I needed was a partner with a good ear to listen to the very complicated and demanding voice from our corporation, and from our Japanese engineers, who believe they are the best in the world. To work with a Japanese company, you have to be very patient and generous, and have a good understanding of the culture. This kind of understanding is very difficult to find in the United States, for example. Switzerland, by contrast, is a small country that speaks many languages and is surrounded by strong neighbours. Emerald itself has a very diverse staff, led by an American, a Swiss and a Brit, with employees from Germany, France, Iran, Poland, etc. It has female employees in leading roles. This corporate culture gives them a good mix of aggressiveness and consultativeness. That combination is quite rare, and so this is why I chose them.
“We are more interested in collaborating with start-ups than in a quick return on our investment.”
What types of relationships are you looking to form with start-ups? Are you always looking to invest, or are you open to different kinds of arrangements?
Emerald’s role is to find good companies, introduce them to Nabtesco’s business units, and hopefully find a way to create value for Nabtesco. Because we have been doing this for quite a while, we have a database of more than 10,000 start-ups. Nabtesco can go back and look at all the companies we have looked at over the last couple of years, and there may be some very interesting technology or innovation in some of these companies that Nabtesco could benefit from today. So we will generate what we call “deal flow” – a flow of start-ups with which Nabtesco could work.
I am completely open to different kinds of relationships. I put more emphasis on the creation of an ecosystem of start-ups than on traditional investments. Investment can come later. Of course as CEO of the fund, I would like to have a bigger financial return, at least to cover my costs. But we are more interested in collaborating with start-ups than in a quick return on our investment.
Of course, if a start-up needs to raise funds, then we are happy to provide them with an investment. But it’s not a prerequisite for working together. The cooperation comes first. If they need the money, and if we’re happy, then we invest.
What makes Nabtesco a good partner for start-ups?
We are dominant in some segments of the Japanese market, and we can help them penetrate the Japanese market, if that’s what they’re interested in. It’s very complicated for foreigners to enter the Japanese market – the Japanese are very conservative, and wary of contact with people they are not familiar with. Also, Nabtesco is an unusual company in Japan in the sense that it is keiretsu-agnostic. (Keiretsu is a Japanese integrated business group.) Therefore, Nabtesco is an ideal partner, because it is able to build relationships with all industrial groups. So having us as a partner can open up a lot of opportunities that would not otherwise be available.
Also, as a Japanese company, we are very highly skilled in manufacturing and quality control. So we can possibly help with the scale up, which is challenging for most start-ups.
What kind of a start-up culture are you looking for?
Most important is the technology itself. That said, we are looking for companies that are agile and entrepreneurial. Also, once we’re looking at making an investment, we need to make sure the company has good management. Or at least they must be flexible enough to learn – to develop their managerial skills, and not just focus on the technology to the exclusion of all else. This is important. Once you’re looking at investing your money in a company, it means you need them to survive, and to be successful, and to make a profit. That’s when you need a good management team.