Creating the Future of Health in Japan Through New Businesses and CVC by a Leading Cancer Insurance Company

Rishiro KiyotōAflac Ventures Japan, Ltd. - Investment Director

After working in the clinical development division at foreign pharmaceutical companies (GSK, Pfizer) in areas such as oncology and respiratory diseases, he was responsible for product development in Europe at a biotech venture that developed biomaterials as medical devices. Later, he engaged in startup investments in the life sciences and medical fields at SBI Investment. Since June 2019, he has held his current position.

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Strategic CVC with Both New Business Development and CVC Functions

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- Could you tell us more about Aflac Ventures Japan?

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Aflac Ventures Japan, Ltd. is a group company of Aflac, the leading cancer insurance company, and plays a key role in investing in startups and creating collaboration opportunities that synergize with insurance and non-insurance businesses in Japan.

The company was initially established as Aflac Innovation Partners, LLC in February 2019, and in January 2022, it rebranded to Aflac Ventures Japan, while also acquiring Hatch Healthcare, a subsidiary responsible for incubating Aflac's non-insurance business in Japan (Hatch Healthcare: HH). This shift accelerated the creation of new businesses by focusing on both startup investments and the incubation of non-insurance ventures.

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(Simplified diagram showing the relationships between Aflac's group companies)

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Furthermore, we are also focusing on creating collaboration opportunities between startups and Aflac Life Insurance (Aflac Life) or its subsidiary SUDACHI, a small-scale short-term insurance company.

Aflac Ventures Japan is a 100% subsidiary of Aflac Global Ventures, which is the CVC of Aflac in the U.S. While we do not have direct capital ties with Aflac Life, we work closely together. We also have exchanges in human resources, with employees seconded from Aflac Life to Aflac Ventures Japan.

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- Could you tell us about your investment schemes and organizational structure?

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We started investing in startups in 2016. The fund size is USD 400 million, and investments are made through Aflac Ventures LLC., a subsidiary of Aflac Global Ventures. There is no fixed maturity for the fund.

So far, we have made investments in 27 companies, with most of the investments ranging from JPY 100 million to JPY 500 million.

The primary purpose of our investments is to create collaboration opportunities through minority investments, but we also have a track record of business acquisitions.

Regarding the structure of Aflac Ventures Japan, there are two main departments under my supervision: the Investment Department and the Planning Department.

The Investment Department consists of five members, including myself, and mainly focuses on the following two areas:

1. Strategic investments in startups
2. Kampo Life - Aflac Acceleration Program

The Planning Department mainly handles the management of Aflac Ventures Japan and its subsidiary HH (Hatch Healthcare).

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Driving New Business and Building Collaborations through Investment

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- Could you tell us about each of your activities in more detail?

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"Strategic Investments in Startups" refers to Aflac Ventures Japan's investments in startups that are driving new businesses in cancer and caregiving through HH, or that show synergy with Aflac Life Insurance or SUDACHI's insurance businesses.

As an example of HH's efforts in post-cancer care, we provide "Hatch Cancer Consultation Support," where cancer patients are supported by nurses and social workers who listen to their concerns and guide them to various services from startups (such as second opinions, treatment support, and home care). This service is offered at no charge or at a discounted rate. Other services include online second opinions through "Findme" and a community platform for cancer survivors, "tomosnote."

In the caregiving field, we plan to start a pilot project in May 2023 for "Living and Care Support," which aims to provide services to address challenges in home-based caregiving, in collaboration with startups.

Additionally, HH offers the self-check service for HPV (which causes cervical cancer) called "&Scan HPV Self-Check" to over 100 health insurance organizations, companies, and local governments. HH also plans to focus on offering startup-driven healthcare solutions to health insurers, companies, and local governments.

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In the insurance business, Aflac Life is working with startups that align with life events, offering solutions for sales agents' business challenges. SUDACHI collaborates with startups on co-development projects in the small-scale short-term insurance field.

At Aflac Ventures Japan, we strive to explore collaboration possibilities with startups through open discussions, keeping in mind the above initiatives. Please feel free to reach out if you are interested.

It is important to note that collaboration with startups does not have to begin immediately after investment. The best timing for collaboration and investment may differ, and we begin by thoroughly understanding the startup's situation and considering areas where our goals align. If we can support your business, even if collaboration is not immediate, investment can still be a viable option.

Of course, collaborations may evolve in unexpected directions, and we are flexible in adapting to new possibilities. We are not rigidly attached to initial ideas and aim to collaborate with startups in a flexible and constructive manner.

As an example of collaboration, we offer an online medical consultation service from one of our portfolio companies, Medical Note, to Aflac Life's insurance policyholders.

"Kampo Life - Aflac Acceleration Program" is an acceleration program co-hosted by Kampo Life and Aflac. The program was established due to Aflac's significant involvement in Japan, despite being a foreign corporation.

Japan Post holds approximately 7% of Aflac Incorporated's outstanding shares through a trust, which has led to a strategic partnership between Aflac and Japan Post, Japan Post Service, and Kampo Life. This partnership aims to create business opportunities by collaborating with startups, starting with the launch of the Acceleration Program in late 2021.

The program's goal is to create new businesses and enhance customer experience through collaboration between startups and Kampo Life and Aflac, addressing diverse and complex customer needs.

The first program in 2022 focused on "Life Events" and "Health," receiving applications from 80 startups, 11 of which were selected for collaboration discussions. To date, we have signed agreements with 8 companies.

In 2023, the second round of the "Kampo Life - Aflac Acceleration Program 2023" will be held with themes of "Healthcare/Caregiving" and "Insurance." Applications began on March 22. We encourage startups to apply!

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(Scenes from the third round selection (pitch event) of the first acceleration program)

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- What are the stages of startups you consider for investment, and what is your sourcing process?

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Investment Targets: Since collaboration is a prerequisite for investment, we find it easier to consider startups that already have products and have started generating revenue.

That said, our investment targets span all stages. While there are fewer examples at the moment, we are aiming to increase our investments in early-stage startups in the future. We believe we can become early users, support verification, and assist with growth. Startups in the seed round or pre-Series A phase are also candidates for investment, and we are eager to engage in discussions. Please feel free to reach out to us without hesitation.

Additionally, we aim to avoid conflicts between the startup's management and our objectives. For this reason, we have generally not taken a lead role or sent board members when making investments.

Regarding sourcing (creating opportunities to meet startups), we hold meetings with around 250–300 companies annually.

While our investments are strategically driven, we also consider the balance of opportunities in our activities. Without opportunities, strategies cannot progress. Therefore, we maintain an open and flexible approach, constantly thinking about how we can align our strategies with opportunities, such as opportunities for selling company shares or meeting financing needs.

In terms of track record, we’ve often initiated contact with startups through cold calls or media outreach, rather than relying on referrals. I think this approach is influenced by my previous experience, where I relied on physical effort to discover opportunities. I regularly check media like Nikkei, startup-focused publications, and international media, and attend events where startups are presenting. I keep track of their past fundraising information and reach out to companies for meetings.

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- What are the unique features of Aflac Ventures Japan, and what can startups expect when receiving investment from you?

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Aflac is the leading cancer insurance company in Japan. We have the #1 market share in cancer insurance, with approximately 15 million policyholders.

As a corporate venture capital (CVC) arm of a life insurance company, we don't have the kind of technology groups typically associated with corporate ventures. What we do have is a customer base of insurance policyholders, which is our most valuable asset. This is why we prioritize thinking about the needs of our customers first.

Cancer is the leading cause of death in Japan, and we believe that by leveraging Aflac’s existing business foundation, startups can help create new value in Japan, a country known for its long life expectancy.

In the caregiving field, with Japan's aging population, we are particularly focused on expanding services to meet the growing demand for in-home caregiving. We aim to collaborate with startups to create new value in this area as well.

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From the Development Field to Business School and Into the Venture World

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- Can you tell us about where you're from and your childhood, Kiyotō-san?

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I’m originally from Kagoshima Prefecture, and I lived there until I graduated from high school. I was in the soccer club, and during my first and second years of high school and college, I played in a hard rock and heavy metal band. I used to sing Metallica and Anthrax songs in English. I was always the vocalist, but I can’t play instruments anymore (laughs).
I also loved manga and anime, especially “Five Star Stories,” which left a strong impression on me.

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During university, I majored in life sciences at Tokyo Institute of Technology. I was inspired by a senior who was making rockets, and when I heard that he was going to Tokyo Tech, I decided to follow him. In my third year of high school, I switched from mechanical engineering to life sciences because I thought it would be easier to get in. I spent a total of six years there, including my master's degree. Since I loved science, I decided to pursue a career in clinical development in the pharmaceutical industry, as I wanted to be involved in science and work in a field that impacts people’s health.

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- What was your career path after becoming a professional and how did you get to where you are today?

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I first joined GlaxoSmithKline (GSK), a British pharmaceutical company, where I worked in clinical development for 7 years. My role involved designing clinical trials for drug discovery.

Afterward, through connections made in industry associations, I was invited by Pfizer to join their team. Although the types of diseases I worked on were different, the job responsibilities were similar to those at GSK. Altogether, I gained around 10 years of highly specialized experience in drug discovery. While at Pfizer, I also attended graduate school, sponsored by the company, to obtain a master's degree in pharmaceutical statistics to deepen my expertise in clinical trial design and analysis methods.

I found working in clinical development at pharmaceutical companies fulfilling, as I felt I was contributing to patients' well-being.

However, both companies were large organizations, and within clinical development, there were many different functions. Over the course of my 10 years in a specialized field, I began to want to move toward more business-oriented roles. Around the mid-30s, I decided to make a bold move and started preparing for studying abroad. A year later, I enrolled in the MBA program at IE Business School in Spain. IE Business School is recognized as one of the top schools in Europe, and many of its graduates from Japan are involved in startups and venture capital roles.

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- Did your time studying in Spain help broaden your perspective and lead to your next career step?

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Actually, I don’t feel that my perspective was significantly broadened during my time abroad. Business school may offer more insights for people who already have a broad perspective, but I don’t think it's a place that automatically broadens the viewpoint of someone who already has a narrow perspective. So, honestly, I didn’t feel that studying abroad drastically changed me (laughs).

From a life experience standpoint, it was great, but I always believed that to expand my business perspective, I needed to work in different business environments. Therefore, I wanted to join a venture company where I could take on a broader range of responsibilities. After returning to Japan, I joined a biotechnology startup that specialized in medical devices. A few months after the company went public, I spent almost five years there, overseeing product development for the European market, business development, intellectual property, and procurement of raw materials. The shift from R&D to more business-oriented tasks in a startup environment was refreshing and exciting. As I progressed, I realized that I was more suited to exploring a variety of technologies and services.

That’s when I decided to move into biotech startup investment and joined SBI Investment in 2016.

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- Moving from a startup to venture capital seems like a significant career change. What was the shift in your mindset?

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Coming from a highly specialized field and transitioning into a more comprehensive business-side role, where I had to manage various aspects of the business, allowed me to view things from different perspectives. I believe my intellectual curiosity led me to seek opportunities where I could interact with various technologies and businesses.

At SBI, I was primarily responsible for the biotech field and over the course of three years, I invested in 15 companies, totaling around 8 billion yen, with a focus on medical devices and drug discovery startups. Of those, 44 companies went public. Among the companies I invested in, 3 were U.S.-based startups.

At that time, I wasn’t as focused on meeting the specific CEOs of the companies; rather, my interest was in the technology base behind the companies. I focused on the strategic vision of how alliances with university professors or technologies could help drive company growth.

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- How did you become involved with Aflac Ventures Japan?

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While working in VC at SBI, I realized that what suited me best was supporting the growth of various services provided by my portfolio companies. At the same time, I felt that pure investment work wasn't the right fit for me.

Instead of just pure investment, I was drawn to the idea of supporting startups with a variety of technologies and services while working together to create infrastructure in healthcare and wellness. This opportunity, which aligns with my values, led me to join Aflac Innovation Partners in June 2019 as the third member of the team.

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- What are your goals in your work as a CVC and how do you see your career path evolving?

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I would like to be part of creating a work environment where dynamic startups can leverage the resources, management assets, and collaboration opportunities that large corporations and mega ventures offer, in order to produce socially impactful results. By creating such an environment, I hope that we can foster a growth in entrepreneurship.

On a personal level, I believe there are many different objectives and perspectives that a venture capitalist can have. CVC (Corporate Venture Capital) involves not only sourcing opportunities, but also constantly considering the needs of the business divisions, so I believe people who are capable of handling multiple tasks will be highly valued.

In terms of career opportunities for a CVC capitalist, continuing to work within a CVC can be rewarding, but it's also an interesting option to move to a startup. If a company like ours has its own established business, diving deep into that can be exciting, or there may be opportunities to get more involved in the management of portfolio companies through M&A. In terms of expanding career opportunities, this is definitely an interesting line of work.

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- What kind of companies would you like to meet as a CVC capitalist?

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Aflac Life Insurance promotes a CSV (Creating Shared Value) management model, which requires not only economic viability but also a high level of ethical responsibility.

CSV management refers to an approach that focuses on creating shared value, which means balancing economic value (profit generation) with social value (solving societal challenges).

The concept gained attention when American management scholars Michael Porter and Mark Kramer published their article "The big idea: Creating Shared Value" in the Harvard Business Review in 2011. Their work triggered a major breakthrough in conceptualizing ways to promote economic benefits while solving social issues, and many companies influenced by this article began practicing CSV and reporting their efforts.

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We are currently collaborating on services and businesses focused on cancer patients, individuals receiving caregiving, and their families within the context of cancer, long-term care, and life insurance. I want to work with companies that have a strong passion for improving people's health and quality of life, and who are advancing technologies in the fields of cancer and caregiving. By joining forces with such organizations, I hope to provide support and contribute to these causes.