Member Spotlight: Dai Watanabe, Delight Ventures

Silicon Foundry’s expanding network of Corporate Members are driving transformation at some of the world’s most respected global brands — from leaders in mobility, mining and telecom, to beauty, retail, energy, financial services and beyond.

Dai Watanabe is the Managing Partner of Delight Ventures, an early-stage venture capital fund in Japan, newly formed this summer. Prior to this, he was the San Francisco-based VP of Strategy and Corporate Development at DeNA, overseeing strategies for various business units of the large Japanese technology conglomerate. He also served as President of DeNA Global and DeNA Beijing, leading the company’s global expansion strategy and execution since 2005. Dai began his career at Sakura Bank, currently known as Sumitomo Mitsui Bank, after graduation from Kyoto University with a bachelor’s degree in archaeology.

For those that don’t know, can you tell us about DeNA and the types of activities you were involved in as VP of Strategy for DeNA Corp?

DeNA is a technology conglomerate in Japan whose businesses range from mobile gaming and e-commerce to mobility, healthcare, and AI. We are also active in Japanese professional sports, with the company owning a major league baseball team, the Yokohama DeNA Baystars (and their home stadium in downtown Yokohama), and a professional basketball team, the Kawasaki Brave Thunders. As VP of Strategy and Corp Dev, I supported multiple business units to identify and explore partnerships, research, and investment in the West.

Your career at DeNA spans almost twenty years — can you walk us through the progression of roles and experiences that led you to where you are now?

I joined DeNA in 2000 shortly after its founding in 1999. During this time, DeNA was a pre-IPO startup growing its team from a headcount of 30 to 100, and I was involved in launching and monetizing our online & mobile e-commerce businesses. Although these various initiatives are no longer what we are known for, their success eventually led our company to go public in 2005.

In 2006, I moved to China to set up a team that attempted to replicate the success we found in our home market. This was the first time I had ever lived overseas, and it quickly became apparent that China’s reputation as one of the toughest markets for foreign companies to enter was well-founded.

During this time, in the late 2000’s, the Japanese mobile internet market was considered to be the largest and most advanced in the world. DeNA quickly took a leading position in this market and became the most successful mobile entertainment player at the time with Mobage, a mobile gaming & social networking service.

I moved to the Bay Area in 2008 to bring Mobage to the U.S. market and subsequently launch a game development business here. Although DeNA invested hundreds of millions of dollars into our U.S. expansion, the rise of the iOS and Android platform ultimately disrupted our business, so in 2016, we decided to close our studios in North & South America. Thankfully, even though the same disruption also happened in Japan, we were able to diversify our portfolio successfully and maintain our home position as a leading company.

In the years since then, I have remained in the Bay Area, acting as an executive liaison between our multiple business units and potential partnerships / investments. I helped our teams back in Japan stay abreast of new trends and innovations, and I would support key initiatives through the building of relationships with startups, corporates, investors, and service providers here in the U.S.

Today, I am leading the establishment of an exciting venture investment vehicle and leaving DeNA to join it as an independent partner.

What are some of the areas you look back at and are most proud of?

As you might be able to gather from my career story, I’ve been part of several initiatives that ultimately had to be shut down, and as such, I’m not sure if I personally consider myself to have any successes I would love to highlight. However, 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.

Looking forward, this new venture fund we’ve designed feels like the compilation of all the lessons I learned through my career, and I’m really excited to be showing it off to the world!

Looking at the evolution of DeNA over the years, the company culture seems to be rooted in the idea of constantly embracing new challenges. What are the key drivers in creating a work environment in which you’re able to pivot, grow and expand the business portfolio so quickly and efficiently?

DeNA is known for its innovation, and the company spends enormous energy maintaining an entrepreneurial culture within a company of 2,400 people, which, as you can guess, is not easy.

Whether it’s about our written values or the way we evaluate performance, you will see constant encouragement from management to “challenge the norms.”

Another example is if you deliver results and your team starts to become dependent on you, DeNA’s HR system may actually move you away from the team to work on a completely new project so that you and the original team are pushed to “step up” and move to the “next level.”

Another reason for this culture is that the Japanese startup ecosystem is still relatively underdeveloped, so DeNA has been able to hire entrepreneurial talent that may otherwise have become founders in more favorable environments. However, I don’t believe this advantage will last forever, as Japan’s innovation ecosystem will inevitably mature and develop more resources and infrastructure to support aspiring founders. Delight Ventures is one way to respond to this potential tide change.

DeNA recently unveiled plans to deploy a corporate venturing vehicle — can you tell us about the general vision, focus areas and structure of the fund? What is DeNA’s competitive advantage in this space?

DeNA recently announced a JPY10b (USD100m) fund, Delight Ventures. It has two key strategic features:

First, Delight Ventures is structured as an independent single-LP VC, rather than a CVC. I will leave DeNA and join Delight Ventures as a partner with the ordinary incentive structure seen in VCs. I will be joined by Tomoko Namba, the Founder and Chairwoman of DeNA, as the other Managing Director of the fund, whose influence ensures that the fund can leverage DeNA’s resources in supporting our portfolio companies.

Creating this fund as an independent entity was a very deliberate decision, as DeNA runs and in the future will launch a wide variety of business lines, and the last thing we would want startups to think is that DeNA might steal their information or hinder their growth because of the potential conflict with DeNA’s existing and future business. We wanted to make sure that Delight Ventures is in the same boat with the startups we invest in and our co-investors.

Second, Delight Ventures’ key deal source will be from DeNA, as one of our key priorities is to encourage innovation from our existing and former employees. DeNA will encourage our 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). Their ability to spin out acts as our validation of their ideas, and when it happens, Delight Ventures will support and fund these “intrapreneurs” much like a traditional VC would, taking minority shares, and from that point forward, the companies operate as their own businesses and would seek growth capital from external sources much like a traditional startup.

We acknowledge that this is a novel idea for a large company like ours and may be quite risky, especially in the Japanese ecosystem, but we structured it in this way because our top priority is to support and encourage DeNA’s talent.

We hope that this approach makes it clear how much we value innovation and entrepreneurship among our employees, helping us to continue to recruit top-tier talent.

For our existing employees and those who have left for other projects, this is a way for us to continue supporting them and keep them within the DeNA family.

While venture investment in Japan has grown rapidly, it stays disproportionately small, compared to other economies in the world. Why do you think this is?

I believe venture investment in Japan is disproportionately small due to the Japanese-centric nature of our businesses and the relatively low bar for Japanese IPOs. Because Japan boasts the third largest economy in the world, it makes more sense for our startups and VCs to have companies focus entirely on Japan, become profitable, and then IPO before even thinking about tackling the global market.

Unfortunately, because of this trend, global expansion becomes an incredibly challenging endeavor, and realistically, it is often too late for these companies to even get started. At this point, companies will usually only have Japanese-centric products and services, not suited for international customers, coupled with shareholders who don’t want the company profit drained for global expansion in the first place! Case in point, these are exactly the challenges DeNA faced when we tried to expand our products overseas.

Bringing this all back to why venture investment in Japan is still relatively small, I believe it’s because global capital isn’t enthusiastic to invest in the types of businesses I just described, companies who have an insular focus and a closed market opportunity in a country with a declining population.

This is a significant missed opportunity for startups and VCs across the board, and something we hope to address with Delight Ventures.

A part of our strategy is to get Japanese entrepreneurs thinking about global expansion and helping them test their ideas on the global stage earlier in the process.

What makes Japan an especially interesting and/or challenging market for entrepreneurs?

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.

New hires compete against their peers within the same batch as they move up the company ladder. This yearly system, and the social expectations it creates, makes the Japanese talent market immobile, which in turn discourages entrepreneurship and healthy startup growth. Additionally, in Japan, when an entrepreneur fails, the perception of this failure is significant and almost always becomes a black mark on his/her career.

I believe this is all changing, and 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.

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.

If we were startup founders sitting here, what’s the advice you’d give about working with DeNA?

DeNA has a large presence in gaming, healthcare, mobility, sports and AI in Japan, and we are also a trusted partner of other large corporations in the region.

If you are interested in entering the Japanese market, let me know! We would be happy to discuss a partnership and help you navigate this ecosystem.