This written interview follows a conversation I had with Daisuke “Dice-K” Kikuchi, a seasoned innovator, serial entrepreneur and investor in Silicon Valley.

During his 18+ years of experience in business and technology, Daisuke was involved in establishing new businesses, developed more than 100 hardware products and applied for 130 invention patents. He received the “Next Innovator” award offered by the Japanese Government. 

As a venture capitalist in the Bay Area, Daisuke operated a $700 million fund for NTT group at NTT Docomo Ventures, having a key role in selecting the next technology startup to receive corporate money. His portfolio included a range of disruptive businesses in VR/XR, AI/ML, IoT, Mobility, Robotics and Retail Tech.

Daisuke is an MBA graduate of McGill University, Valedictorian of MOT from Tokyo Institute of Technology and a graduate of Stanford Business School Professional Course. 

NR: Daisuke, thank you for accepting our invitation and sharing your knowledge with us.

DK: Thank you for having me, it’s a pleasure to do this. 

NR: Before moving to the US and invest in other businesses, you had your own startup founded in Japan. Tell us about your experience as an entrepreneur. Where did the challenges come from and how did you manage them?

DK: The biggest experience I gained through a startup business was “39Meister” a white-label maker I founded in Tokyo in 2015. It was a live experience of building a business with my own team, creating the solution, selling it and getting paid directly to our bank accounts. We went through a cycle of making plans and evaluating them with great frequency, from big business policies to small action items.

The speed at which we built the startup and the sense of team unity was an experience that I would have never had at a large enterprise.

“39Meister” helped businesses get over their struggle with design and production of IoT hardware products. Our initial hypothesis was that hardware startups were struggling in the “Mass Production Stage”, but this was an inaccurate assumption. It turned out that most startups’ primary challenges laid with the “Prototyping Stage”, the stage after the Proof of Concept (PoC). We quickly pivoted to focus on the prototyping stage. 

At that time, small factories in Japan had excellent technology for building hardware, but orders from major companies were decreasing. So we decided to make partnerships with such factories. But in the beginning, most factories refused to collaborate with us. The major reason was they never worked with startups and my initial proposal, based on statistics and numbers, did not convince them.

I persuaded the factories into believing that startups were going to dedicate their every waking moment building their hardware products.

So I decided to change my pitch and stake on the top quality of a startup: the motivation and dynamics behind their teams and founding members. When I approached the factories from a different angle, they began to sympathise with our idea. Their employees changed the attitude towards startups and begun to show respect for our work. In no time, the factories turned into strong supporters and we had 20 partners voluntarily joining our project. 

After the business took off, we found that the factories’ strong sense of commitment to the startups contributed to reducing the cost and time of manufacturing to a far greater extent than a carefully designed cost reduction plan would have.

Mistakes are not taken as failures when driven by good intentions.

During our journey, I established a rule to encourage the team forward: “We are here to solve the struggles of our clients. If you think through every situation clearly and your idea or technology might help the client, let’s do it! Mistakes are not taken as failures when driven by good intentions.”

Thanks to this principle, I successfully built a self-solving, autonomous and united team. An extended interview on 39Meister, taken by the Ministry of Economy, Trade and Industry of Japan is to be found here.

NR: Tell us a bit about your experience in Silicon Valley and introduce us to the concept of Corporate Venture Capital.

DK: Silicon Valley is home to a large number of startups and has a unique and well-developed business support and investment ecosystem. While in the Bay Area, I was responsible for finding startups that matched the direction of the company I represented, create business partnerships and invest in those startups.

The company I belonged to was not a pure investment company, but a so-called Corporate Venture Capital (CVC). CVC differs from regular Venture Capital because the purpose of investment is more about building synergy with the existing business rather than just financial returns. 

To do this I had to fully understand the long term business strategy of the headquarters and fund those startups that could buy us time on the market. The directions I was interested in were DX and VR/AR, rather than those trending in Silicon Valley. I focused on technologies related to work innovation, edge processing, AI, and entertainment areas.

During my experience, I realised that entrepreneurs have the same values when devoting themselves to creating innovative products, regardless the region they come from.

NR: How did the pandemic affect the trajectory of the startups this year? Could you share an example?

DK: Indeed, 2020 was a particular year, due to COVID-19. I paid special attention to the technologies that will persist even after COVID has left the market. A good example of such a startup is Zippin.

I was in charge of the investment and business development of this company since 2018. Zippin builds and provides a product recognition and payment solutions for merchants to support deploying grab-and-go system. After working with a specific Japanese convenience store chain on a PoC for this system, we actually opened the first store that adopted Zippin system to enable the store to being cashier-less in Kawasaki.

During COVID, Zippin attracted attention in Japan due to its contribution in avoiding human contact, so we received inquiries from many convenience stores and enterprises. But I believe this kind of service that is convenient for end users once it reaches the market, will stay in the market even after the specific context of the pandemic ends.

NR: At what level technologies such as AR or VR integrate in our lives? Where do you see the advancements going and how do you think they will shape the future?

DK: The VR and AR technologies are already widely used in the industrial and entertainment fields. However, I don’t think they are yet integrated into our daily lives. For example, we use our smartphones for many hours a day, but I don’t think anyone goes out with VR goggles on. In other words, I think these technologies are still being used at select times and places today. But my guess is the things will dramatically change in the future. In terms of hardware, AR and VR might take the form of smart glasses, for example. Virtual objects and information could be overlaid on the real world we see through our glasses, similar to the world depicted in the Japanese anime “Denno Coil“. These wearables would then replace display devices such as TVs, PCs, smartphones, meters in cars and navigation screens.

I think the world will come to a point where we won't be able to distinguish whether the information we see is part of the real or the virtual world.

But there are several technical issues that need to be addressed before this can happen. One is how to provide information to the user and another is how to develop the hardware. The biggest technical challenge, however, is the technology to recognise where the user is in the real world, and who or what will deliver the information, according to user’s location. At first glance, it seems that the user’s location can be easily determined by GPS, but it is still difficult to determine the precise location in buildings, underground or factories. Accurate spatial understanding is essential not only for the visual overlay of information but also for generating the so-called Digital Twin.

I believe that a completely different method of expressing spatial location information on the Digital Twin will be necessary, other than the method we currently use on earth’s surface, such as latitude, longitude, and altitude. Startups can make a significant contribution to the development of these technologies, that will become de-facto standards. I also believe that spatial understanding will become very important in smart cities, which are currently the subject of much discussion. For example, energy, human movement, logistics or mobility could be simulated on the Digital Twin, and a system could then analyse and deploy the results.

NR: Since our discussion got closer to Smart Cities I would like to extend a bit on the topic. How do you see smart cities in the future and what’s your view on the ready-to-launch Woven City project?

DK: You see, the trend today is to focus on how to acquire data as an urban function integrated with mobility, how to utilise that data, and what kind of business to do with it. But I think smart cities should not only solve the problems of local governments and enterprises. The most important point for a smart city is to accurately understand the issues faced by its residents and to develop optimal technological solutions that actually solve these issues.

The starting point in any discussion about smart cities should be: “What do residents want from urban functions now and in the future?”

I see the future smart city integrating a range of technologies that have been developed individually so far, such as energy, mobility, IoT, cloud, AI or VR. It is necessary to consider the function of the city as a whole, and plan the deployment. However, the actual implementation has to be done on existing cities, being the only option we have at the moment. And the problem with existing cities is they have various constraints regarding the infrastructure needed for people to live and work there and the only approach we can take is to update one function at a time.

Now imagine we can build a city from scratch! That is what makes Woven City project unique.

Woven City would be an environment where we can start from a blank sheet of paper, come up with a hypothesis of what urban functions are required, deploy it and test it. This is the essence and value of such a project and Japanese companies may use the chance to contribute to the future of mankind by applying the knowledge gained with Woven City to cities around the world.

NR: There will be definitely a lot of innovation happening inside Woven City. From an innovator’s perspective, where do you see the challenges in this project?

DK: In the Lean Startup or Lean Development Method, the first step is to understand the problems of the users who will actually use the technology or product we deliver. The next steps are to think a hypothetical solution for the problem – the PoC (Proof of Concept), make the simplest prototype – the MVP, or Minimum Viable Product, and test it in the real world by having end users play with that MVP. This cycle is repeated inexpensively and rapidly.

An innovator is someone who understands the Lean Development process and executes the PoC without the fear of failure.

However, it is not possible to build a whole city from scratch on a trial basis and then rebuild it. The most important thing as I see it is to be able to proceed in project units that respond to the resident’s issues. Therefore, it is preferable to break down the city functions into technical elements and introduce Lean Development Methods in each area. I think this should be the case for Woven City development.

The ability to build a transparent and secure cycle of data collection-distribution-usage is key to any smart city. If this fails, the residents could be negatively affected by the data being retrieved.

In terms of challenges, there will be many in a project like Woven City. To solve the pains of the residents, a large amount of private data will be collected and used. This implies a new concept of sensor networks and various devices to get this data securely. Then, conversion of that information into tangible value for the residents will be necessary. All of this has to be a transparent process, as people living there will feel more comfortable having a sense of where and how the data is going to be used. To achieve this, we need a new urban operating system and a way to securely distribute data. I believe these will also be the roles of the next innovators here.

NR: You recently moved back to Tokyo. Considering your experience in Silicon Valley, what would you bring back to the Japanese business ecosystem?

DK: Unfortunately, in Japanese society we have a system in which failure to follow a plan results in a negative evaluation. In many Japanese enterprises, the so-called “waterfall” type of development is still the norm. This means that new services are planned meticulously, but they usually take more time, money and involve a long approval process before getting funded. Then, once a project is running, backtracking is rarely accepted and even if the project struggles, withdrawal is hardly permitted.

On the other hand, the Lean Development is a process that cannot move forward without failures or making mistakes. We make a tentative design and repeat the process of gradually getting closer to the latent needs of the users while repeating the failure of coming off the mark. 

From the Silicon Valley I would bring back a culture in which failure as a result of a challenge is regarded as an achievement.

If Japanese enterprises want to collaborate with startups in the future, they will have to change not only the mindset of their employees, but also their internal culture and processes. This part of the western culture will be especially important in big challenges for which there is no clear pattern of success. For this reason, I think a strong commitment from upper management is mandatory to bring more Open Innovation inside major enterprises.

NR: Daisuke, thank you for taking the time to have this conversation! Best of luck in your present and future projects!

DK: Thank you, as well!

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Tudor Tomos

Tudor Tomos

Senior Researcher, The Nagaoka Review