The Thrill of Investment: Direct Communication. The Future of Startup Investments by Corporate Entities

Tetsuya Endo
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Business Producer, Business Design Department, Media Business Development Division, TV Tokyo Communications, Inc.

‍Born in 1982. After graduating from university, he worked for Seiyu Corporation in retail sales for 4 years. After gaining experience in the financial industry, he moved to DMM.com in 2009, where he led 4 businesses as the business unit director, driving the company's digital transformation. He launched the Anime and Game businesses and led strategic M&A execution and post-merger integration (PMI). In 2016, he moved to the consulting firm Egg Forward, where he assisted in building sales organizations and organizational strategies. He has also experienced being a founder of two companies. Currently, he is the manager of the alliance and investment team at TXCOM, focusing on media domain updates and creating new businesses with various companies. He also designs the strategies of two companies as the CSO.

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- Could you tell us about your background and how you ended up in the investment business at TV Tokyo Group?

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After graduating from university, I worked in finance, trading companies, mega-ventures, strategic consulting, and entrepreneurship before landing in my current role. My acquaintances often say I have an unusual career path (laughs).

Looking back, I think the big turning points were joining the DMM Group and later making the career change to Egg Forward.

When I joined in 2009, DMM Group was starting to see significant success with its distribution business, rapidly growing revenue and profits, and accumulating cash reserves. On the other hand, it seemed to struggle with recruiting the talent needed for new growth.

To me, it felt like an opportunity to join DMM Group at that point. My initial expectation was to expand sales, build and execute sales strategies, and in doing so, I was able to apply my experience in sales from the financial industry to introduce efficiency and new sales approaches, which led to good results in DVD sales early on. I was consistently at the top. The results caught the attention of the management team, and I was promoted to the business unit director. The company was growing rapidly, and promotions were happening quickly. From there, I was fortunate enough to also take on M&A and PMI (post-merger integration) responsibilities.

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- Considering that M&A was still not very common in Japan in the 2000s, and you didn’t have a background in investment banking or private equity, your experience managing M&A strategies is quite rare, don’t you think?

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Yes, I do think I was fortunate in that sense. Back then, I was just as enthusiastic as the management team, and even though I didn’t know much about M&A, I ran to the bookstore to study it, and with a lot of confidence, I told the top executives, “I’ll do it! I can do it! I will show you!”

There probably weren’t many others who could do it, so they trusted me and gave me the chance to take on that responsibility.

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- What kind of M&A experience did you gain?

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The first acquisition I was involved in was a company that distributed PC games and drama CDs. At the time, their sales were about 2-3 billion yen.

The reason for the acquisition was that the largest sales channel for DVD, CD, and PC games at the time was facing difficulties in opening new accounts. By bringing this company, which had a strong relationship with the largest distributor, under our wing, we were able to tap into that sales channel.

At the time, analog and digital were coexisting, but the shift to digital was accelerating, and it was clear that businesses like wholesale distribution were shrinking. Smaller companies with individual capital were worried about the future. Strategically, we identified several mid-sized wholesale distributors with strong ties to the largest players and decided to acquire one of them. This was a competitive acquisition.

After that, as the shift to digital accelerated, I led the launch of the Anime and Game businesses, and at one point, I was concurrently managing four business units.

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- Given that M&A and PMI were still rare in Japanese corporations at the time, and considering that you had already gained considerable experience leading new business ventures, what led you to consider a career change?

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About five years after joining DMM Group, I felt that I had accumulated a lot of experience. While I felt confident in the growth I had achieved, I started to think about how I could leverage that experience going forward. At the time, I was also attending the Globis Graduate School of Management, and I wanted to academically reassess my knowledge in corporate strategy and finance, as well as think long-term about what I should pursue in terms of creativity and transformation.

Although I was grateful for the opportunities I was given at DMM Group, and I had a great sense of fulfillment from the important roles I was entrusted with, I still felt that as a newcomer, it would be difficult to enter the circle of trust that had been built among the top executives and those who had supported the company from its early days.

After turning 30 and feeling like I had done everything I could at DMM, I began to think about my next career step and decided to join EggForward, a strategy consulting firm. The firm, which had only 6-7 members at the time, was already receiving high-profile contracts, and I saw firsthand the extraordinary abilities of the professional consultants and their dedication to working long hours. They would only take taxis, but that was because they continued working during the commute and after meetings. It was shocking to me at the time, but the team members, regardless of age, were incredibly capable. It was a tough but learning-rich environment.

Although I initially thought I would stay there for a few years to gain more experience, there came a point where it became difficult for me to keep up with the pace, and I left earlier than expected. Even though my time at EggForward was short, it was an invaluable experience, as it greatly expanded my perspective and way of thinking, and I feel that it broadened the scope of my thinking.

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- How did you end up joining TV Tokyo Communications after leaving EggForward?

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Before joining the TV Tokyo Group, I had the experience of founding two companies and then selling them through a buyout (business sale). In my previous role, I had gained a deep understanding of the e-commerce structure, from logistics to web platforms, and I also learned how to deal with the somewhat “messy” and "dirty" aspects of executing practical work. This experience helped in growing the new companies from the ground up. After selling the companies and stepping down as a director, I received an offer from the TV Tokyo Group through a connection for a recruitment opportunity.

The company was looking for someone who could lead the digital transformation (DX), strategically handle things, and had consulting experience. When I heard about this, I thought such a person would be hard to find, and indeed, after about six months of searching, we still couldn’t find the right candidate. At that time, I didn’t have a clear idea of what I wanted to do, but after thinking about the position of the TV industry and the future of society, I saw it as a new opportunity. So, I decided to apply myself and join the TV Tokyo Group.

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- Could you tell us about the investment activities at TV Tokyo Communications?

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TV Tokyo Communications is a company within the TV Tokyo Group that deals with cross-media, video distribution, and IP businesses. Since 2019, we have started investing in startups in the entertainment sector with the goal of creating new businesses and value.

Our investment focus is exclusively on Japan and is specialized in the entertainment industry. Instead of setting up an investment entity, we operate under a principal investment model. We make minority investments, and in some cases, we take a majority stake depending on the investment target. Investment amounts typically start from several tens of millions of yen, and currently, we have invested in five companies.

The primary criteria for our investment decisions are: (1) the management team, (2) market growth potential including business synergies, and (3) competitive advantages.

The typical process from the first meeting to investment takes about 3-4 months. The business model and the compatibility with our expectations are evaluated in collaboration with the project teams. If we determine that there are business gains and capital gains to be expected, we proceed with the investment by following these steps: Investment proposal → Executive discussions → Due diligence → Approval in internal meetings → Final checks → Investment.

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- What kind of support does TV Tokyo Communications provide to startups?

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Startups often expect support from us in areas like media exposure and media planning. These are areas we specialize in, so while we cannot offer preferential treatment just because they are investment partners, we have positive discussions with them as close partners, keeping communication costs down.

For example, Zeppy, one of our portfolio companies, has the largest stock investment-focused YouTube channel in Japan and also creates content. With them, we have collaborated on producing a digital economy TV program. Similarly, with SEPAL, another portfolio company, we are selling products using our company’s IP on an EC system linked with LINE. We also cooperate with other startups in organizing joint events.

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- What is your perspective on the role of shareholders in venture companies and the possibility of collaborative investments?

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Mega ventures, like GAFAM and Tesla, are leading the American economy, and I hope to see similar companies emerge in Japan. Despite the economic stagnation caused by the pandemic, Japanese companies still have enormous internal reserves. While current economic growth remains sluggish, I believe there is significant potential in investing in startups and entrepreneurs to help build Japan's future.

However, as much as I would like to make a big statement, there are limits to what we can achieve alone. That’s why I am open to actively exploring co-investment opportunities with CVCs (Corporate Venture Capital) and VCs (Venture Capitalists) who share the same vision. I believe startups with business models that can leverage media assets for value enhancement are particularly well-suited to us, so if there are companies in need of such support, I would love to hear from them!

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- What are the rewards and challenges of investment activities within a corporate organization?

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The reward of investing in startups is the direct communication and relationships with entrepreneurial teams. You can see just how much passion and energy these teams pour into their products and business plans, and how challenging it is for them to deal with investors during fundraising. These are experiences you don’t typically encounter in a large corporation. In addition, to make sound investment decisions, you need to have strong financial skills, such as understanding business revenue and cash flow.

As investment is just one aspect of the overall business operations, you cannot fully concentrate on it alone. There are constraints, such as not knowing how long you can stay involved or having fewer incentives compared to VCs. However, I find it very rewarding to be involved in startup growth while enhancing my own experience in the process. I believe that startup investment by corporations in Japan is still in its early stages, so I am grateful for the opportunity to be involved in this area.

One of the challenges of creating new businesses within large corporations is the difference in approach compared to mega ventures. Large corporations often rely on internal pitching or idea solicitation for new business, which can lead to gathering a lot of opinions. However, there is a big gap between simply collecting ideas through brainstorming and actually analyzing the market and resources to build a viable business model.

This gap can only be filled by people with hands-on experience in entrepreneurship and business development. However, these types of talents are not often found within traditional companies. Even if a company tries to recruit externally, there are challenges in matching experienced business developers with environments that are attractive enough to draw them in.

Personally, I’ve had the opportunity to work in the digital space and launch businesses, which led me to my current role. But I believe it’s overly optimistic to think you can create new businesses without utilizing prior experience and knowledge. Similarly, I don’t think it's easier to develop new businesses simply by “investing” in startups. Startups prioritize building their own businesses first, and many companies don’t seem to understand this reality.

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- Looking ahead, what kind of startups or entrepreneurs would you like to meet and invest in?

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It might sound arrogant, but I want to meet startups and entrepreneurs who have the spirit and passion to create new industries. With the spread of the internet, Japan has seen the rise of mega ventures like Rakuten, CyberAgent, and Mercari. At the same time, entrepreneurship has become more common, and it’s now normal for top consultants or MBA holders to venture into startups. I believe we will see more and more startups and entrepreneurs that we can entrust with the future. In addition to their excellence, I want to support entrepreneurs who have a “strong conviction” and “determination” to change the world. I am not referring to grandiose talk, but rather entrepreneurs who possess the belief and passion to create a new industry that cannot be fully captured by "economic rationality." I would love to be part of such an entrepreneur's journey and help them realize their vision!

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- Could you tell us about your vision for the future regarding your investment strategy and exit plans?

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We have a benchmark for investment returns based on the internal rate of return (IRR), but we do not have a fixed holding period. Ideally, we hope for the new business to grow and take flight, with the best scenario being an IPO (Initial Public Offering) exit. In other cases, the approach would be more flexible, as we don't have a fixed timeframe like some CVCs.

Our mission, “updating the media industry,” cannot be realized through investment alone. However, new technologies and initiatives related to the media industry are emerging outside the company. We are actively seeking partnerships with startups, management teams, and shareholders who share our aspirations and can help bring innovative ideas to life, even if those partnerships don't always have a specific form.

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