Keeping up with market trends is crucial when starting or expanding a business. Particularly in fields with high interest from entrepreneurs and investors, new technologies and services emerge daily, and trends shift rapidly.
In this article, JAFCO's investment professionals, who invest at the forefront of various industries, provide insights into the trends of the bioeconomy, mobility, deep tech x AI, space, healthcare, and energy sectors. Using examples from their investment portfolios, they reflect on the present and future of these fields.
Bioeconomy Sector
The main battleground for the future will be in the red biotech field, including pharmaceutical development
Background & Interests
After researching biotechnology at Tokyo Institute of Technology, I joined JAFCO with the ambition of creating a deep tech industry from Japan. My interests span across deep tech fields centering on biotechnology, with a focus on startups in areas like medicine, life sciences, robotics, semiconductors, and AI.
Portfolio Companies in the Bioeconomy Sector
Synplogen Co., Ltd. (R&D related to genome synthesis technology)
Bio Palette Co., Ltd. (development of microbiome therapeutics by using genome editing technology), etc.
Recent IPOs
Chordia Therapeutics Inc. (R&D of anti-cancer drugs)
Market Overview
The bioeconomy is a concept proposed by the OECD in 2009. It's a field that aims to shift from traditional petrochemical-based material production to clean material production using biology, contributing to a carbon-neutral society. Since the late 2010s, there has been active investment in this area.
In recent years, the foundry business has expanded, especially in the US, and many unicorn companies have emerged. However, the market has recently faced a downturn, partly due to the economic impact of the post-COVID era. Despite this, the sector remains a priority globally at the national policy level, and competition among companies continues.
The bioeconomy is generally categorized into red bio (medical), white bio (chemical), and green bio (environmental). Due to the low profitability of the white and green sectors, they are facing difficulties. As a result, foundries are increasingly shifting their focus to the high-value red bio field, where demand is clear.
Key Technologies to Watch
In the bioeconomy, the DBTL (design/build/test/learn) cycle is fundamental. Within this, DNA synthesis and genome editing, which fall under the "build" phase, are core technologies essential for future development. For Japan to establish a strong position in the bioeconomy sector, it is crucial to maintain these technologies at the national level.
One of my portfolio companies, Synplogen, specializes in long-chain DNA synthesis technology, which integrates multiple genes into long strands of DNA. The company is particularly focused on the red bio field and is working to expand bio-foundry capabilities tailored to gene therapy. They have already established partnerships with domestic and international firms, building a global system capable of GMP manufacturing.
I've also invested in Bio Palette, which possesses a single-base editing technology that evolved from the Nobel Prize-winning genome editing technique, CRISPR-Cas9. This technology is a basic patent held by Japan and is expected to play a crucial role as a strategic national asset.
Market Outlook
Going forward, the red bio field will likely become the primary battleground. I anticipate intensifying competition between countries and companies to establish a dominant position, similar to TSMC's role in the semiconductor foundry industry. Alongside the emergence of such platform providers, there will also be players developing unique products like gene therapies in the red bio space. I plan to continue exploring investment opportunities with this perspective in mind.
Bio-foundries are also important from an economic security standpoint. During the development of COVID-19 vaccines, Japan had no domestic production capabilities and had to rely on overseas manufacturers--a situation still fresh in our memories. To address such challenges, I expect increased national support for the bioeconomy sector in the future.
Mobility Sector
Strengthening domestic transportation capacities and creating a globally competitive automotive industry
X
Background & Interests
I joined Toyota Motor Corporation straight out of university, where I was involved in program management for new HEV cars and hypercars. Later, I worked at an overseas strategy consulting firm, focusing on mobility, manufacturing, and IT sectors. In the mobility area, I was engaged in strategic consulting for a wide range of businesses, including railroads, pleasure boats, and motorcycles. At JAFCO, I primarily invest in the mobility and manufacturing industries.
Portfolio Companies in the Mobility Sector
newmo, Inc. (ridesharing services), etc.
Market Overview
The mobility sector experienced a major turning point during the COVID-19 pandemic. From the perspective of human transportation, the sharp decline in travel severely impacted transportation services, while demand for private cars increased, leading to growth in the used car market. On the other hand, regarding transportation of goods, the pandemic raised issues around how to handle logistics amidst a halt in human movement and how to better leverage e-commerce.
In the post-pandemic world, the role of transport providers is being redefined. For example, in the case of human transportation, the shortage of taxi drivers has led to the rapid rise of electric scooters, bicycles, and ridesharing services. It seems that the time is approaching for a clearer answer regarding what balance is optimal in today's transportation landscape.
Key Technologies to Watch
In 2023, the government began discussions on ridesharing, leading to the establishment of newmo. JAFCO made its initial investment the month after the company's founding. In April 2024, ridesharing using private vehicles was legalized under the condition that they operate under taxi companies. Newmo entered into a capital partnership with a taxi operator in Osaka and launched ridesharing services in July.
Newmo stands out for its role in considering the future of secondary transportation in Japan in collaboration with the government and various industries. Not only does it develop ridesharing, but it also involves the taxi business, aiming to comprehensively address the shortfall in secondary transportation capacities.
Market Outlook
In densely populated areas like the Tokyo metropolitan area, I expect the transportation network will be further optimized, including public transport, secondary transport, and autonomous driving. Meanwhile, in regions facing depopulation and aging populations, discussions will likely evolve beyond just mobility, involving urban planning and population concentration.
From the perspective of the mobility sector, automobiles remain the key to Japan's industrial future. Given that Japan's automakers have established a global supply chain, it is essential to ensure that surrounding industries are also positioned to compete globally.
I am committed to supporting Japanese companies as they succeed in the global market, together with startups like Fact Base (blueprint management systems) and Zeroboard (greenhouse gas emissions calculation and visualization) that provide solutions for the manufacturing industry.
Deep Tech x AI Sector
The key for Japanese companies' AI utilization lies in its fusion with non-digital fields
Background & Interests
After conducting AI research at the University of Tokyo, I pursued a career in manufacturing, driven by a desire to create tangible products. I first worked as a project manager at Nomura Research Institute, then at SoftBank Robotics where I was involved in IT planning for new robot developments. Later, I moved to BCG Digital Ventures to help create new businesses.
At BCG, I mainly focused on AI and Web3 domains, where I gained experience in launching joint ventures with clients and bringing products to market. I joined JAFCO in 2023.
Portfolio Companies in the Deep Tech x AI Sector
Sakana AI K.K. (development of autonomous AI)
Market Overview
The key trends in the AI field to watch are multi-agent AI and multimodal AI. Multi-agent AI refers to the technology where multiple autonomous AI systems work together to perform complex tasks. When ChatGPT first appeared, people likened it to a helpful assistant that could answer any question. However, it has evolved recently to perform tasks at a managerial level, and this kind of technological progress will only accelerate.
Multimodal AI, on the other hand, is technology that can process various types of information like images, voice, and text simultaneously. If multi-agent AI is bringing AI closer to human capabilities, then multimodal AI is broadening its range of applications. The former has strong technical elements, which makes it difficult for Japanese companies to assert a global presence, so I believe that the latter holds greater potential for competing globally.
However, sectors like AI combined with digital services are capital-intensive, so if Japanese startups can fuse AI with non-digital sectors like biotech, drug discovery, or semiconductors, there might be a winning strategy for them on the global stage.
Key Technologies to Watch
Sakana AI, which we invested in at the end of 2023 and which became a unicorn within its first year, is an exceptional company in Japan's multi-agent AI sector. The founders are two former top AI researchers from Google, one of whom co-authored a crucial paper on the "Transformer" architecture, the foundation of AI products like ChatGPT. With their expertise, Sakana AI is poised to stand alongside major players like Mistral AI in the EU and Anthropic in the US.
One of Sakana AI's major innovations is the evolutionary model merge, a technology that automates the process of combining multiple models into a new AI model. This has triggered a paradigm shift in the AI world. Their unique approach draws inspiration from biological evolution and natural selection to ensure the merged models harmonize and operate effectively together. This biologically inspired approach suggests that AI will continue to evolve in ways that resemble human capabilities, opening up vast new possibilities for application.
Market Outlook
I believe deep tech will evolve significantly through its integration with AI. Manufacturing processes will become more efficient, and numerous new business models will emerge. However, a major challenge is the limited exchange of talent between deep tech and AI fields. For instance, it will become essential for students studying primary industry to learn about AI as part of their academic training.
If Japanese startups are to compete globally, they must fuse AI with non-digital sectors, as I mentioned earlier. Japan's strength lies in its manufacturing industry, which is also a large market, and I believe there's great potential in fields like "seatech," which capitalizes on Japan's abundant marine resources. Whether talent exchange between deep tech and AI progresses or companies like Sakana AI develop systems that make it easier to create AI models, either of these scenarios could act as a trigger for rapid expansion. I will continue to keep a close eye on these trends.
Space Sector
The rise of Japan-originated startups leading the future space industry
Background & Interests
With a strong interest in space as a field of engineering, I majored in aerospace engineering at Kyoto University. In my undergraduate studies, I conducted research on orbital calculations and attitude control of spacecraft. In graduate school, I was part of a propulsion engineering lab working on converting plasma for semiconductor processing and ion thrusters. At JAFCO, I am responsible for deep tech and education sectors. In 2015, we made our first investment in Astroscale Holdings, JAFCO's first investment in a space startup. They successfully went public this June, and we expect further growth.
Portfolio Companies in the Space Sector
Astroscale Holdings (on-orbit services in space)
Synspective Inc. (development and manufacturing of small SAR satellites and satellite data solutions)
Recent IPOs
Astroscale Holdings (on-orbit services in space)
Market Overview
Japan's Basic Space Plan, which was approved by the Cabinet in 2023, highlights four key areas that Japan will focus on. Currently, domestic space-related companies that have raised over ¥5 billion in funding generally fall into one of these four areas.
The first area is ensuring space security. Given the recent global geopolitical situation, it is crucial for Japan to strengthen its security, particularly through satellite-based intelligence gathering. This is the most critical theme within the space sector.
The second area is building resilience for the nation and addressing global issues through innovation. This involves using communication satellites and satellite data for disaster prevention and swift responses to crises. Synspective, one of our portfolio companies, is a player in both the first and second areas.
The third area is creating new knowledge and industries in space science and exploration. This includes activities such as exploring deep space beyond the solar system, extracting resources, and lunar exploration for Mars missions.
The fourth area is strengthening the comprehensive foundation that supports space activities. This includes activities like space debris removal, which is being handled by Astroscale Holdings, as well as rocket development and operations.
Key Technologies to Watch
As highlighted by these four areas, the space business targets not only outer space but also applications on Earth. For instance, Synspective's satellite data solutions contribute to solving various issues on Earth.
Synspective's technology involves using radar satellites to emit microwaves toward Earth and analyze the reflections to understand the planet's conditions. It offers a wide coverage with a resolution of about one meter. Its ability to detect height information allows for detecting ground deformation at millimeter-level precision to prevent landslides and sinkholes (utilizing InSAR). Additionally, the technology can calculate CO2 absorption levels based on forest height to create carbon credits, or measure wave height to find optimal locations for offshore wind power generation.
When the Noto Peninsula earthquake occurred, Synspective's satellite data, which was provided for free by various companies, was helpful in assessing the situation in the disaster-affected areas.
Market Outlook
In the past, the space business was often associated with rockets and satellites. However, over the last decade, the scope of the space business in Japan has expanded significantly. While other countries are ahead in rocket development, I believe Japan holds a strong position in the satellite-based business. For instance, Astroscale Holdings is the first company in the world to commercialize space debris removal, and there are only five companies globally that handle small radar satellites, two of which, including Synspective, are Japanese.
Currently, there are three publicly listed space startups in Japan. Just as the IT industry experienced a boom, I expect that these three companies will serve as benchmarks, encouraging the rise of new startups and entrants into the field. Once the infrastructure for space-related societal applications is established, the focus will likely shift to consumer-oriented services, allowing a variety of startups to emerge and compete in different fields.
Healthcare Sector
Supporting the creation of new businesses that transform medical practice
X
Background & Interests
I joined JAFCO after graduating from the Faculty of Economics at Hitotsubashi University. Since 2022, I have served as Chief Capitalist. With a theme of solving deep societal issues, I have been investing in startups across a wide range of fields, including healthcare, energy, and AI.
Portfolio Companies in the Healthcare Sector
Gaudi Clinical Co., Ltd. (regenerative medicine platform)
LPIXEL Inc. (AI and image analysis solutions for life sciences)
K.K. CYBO (digital pathology and image analysis, including cell diagnosis)
CaTe Inc. (development of a mobile app for cardiac rehabilitation), etc.
Portfolio Companies in the Energy Sector
Planet Savers, Inc. (development of atmospheric CO2 capture (DAC) devices using zeolite), etc.
Recent IPOs
Astroscale Holdings (on-orbit services in space)
MRSO, Inc. (online reservation service for medical checkups)
Market Overview
Within the healthcare sector, I've been investing in areas focused on improving operational efficiency in medical settings through AI and supporting patients with treatment and rehabilitation through apps.
In the medical businesses, startups are growing in line with legislative changes, such as the inclusion of AI-driven image diagnostics in health insurance (since April 2022) and the upcoming new reforms for doctors' working styles (to take effect in April 2024). For example, LPIXEL, one of our portfolio companies, offers services that analyze medical images like CT, MRI, and X-rays using AI to support physicians' diagnoses.
In patient-centered businesses, CaTe is developing an app that allows heart rehabilitation treatments to be conducted at home. Heart disease patients are eligible for rehabilitation covered by insurance for five months after surgery, but more than 90% do not actually undergo it due to the inconvenience of visiting the hospital. The app aims to resolve this issue and reduce hospital readmission rates. Such businesses are easier to commercialize under Japan's universal health insurance system, and I expect more startups to enter this space.
Key Technologies to Watch
In areas such as drug discovery and medical device development, where the value of the company itself is determined by the value of the science, I believe that investment professionals who can accurately evaluate the science should be the ones who invest. What I am good at, having no technical background, is in areas that require business assembly beyond that.
That's why we are investing in startups like LPIXEL and CaTe because we see potential in them, and we are also interested in the area of treatment not covered by health insurance, which is not often focused on by investment professionals with science backgrounds.
Market Outlook
While there is expected growth in new services within the framework of universal health insurance, the limited resources available in the healthcare insurance system suggest that startups focusing on private healthcare may also emerge.
For instance, Gaudi Clinical, one of our investments, is working on a platform that allows patients to safely access regenerative medicine through private healthcare. Also, although infertility treatments are covered by insurance, the scope is limited, and we might see companies that work on improving success rates for those who pay out of pocket. In overseas markets, there are examples of apps that treat pain and joint conditions with exercise therapy, sold outside of insurance coverage. I believe there is strong demand for pain relief, so there's potential for services that target such needs.
Energy Sector
The role of DAC (direct air capture) in leading the GX (green transformation) initiative
X
Market Overview
Similar to the healthcare sector, I am focusing on investing in businesses that manage resources on the demand side rather than those directly involved in power generation. In recent years, the keyword "demand response" (DR) has gained traction, with an increasing number of companies entering the business. One of our previous investments, ENERES, had been working on this field before DR became widely recognized, providing a broad range of services aimed at reducing electricity costs for corporate clients.
Additionally, REXEV, a company founded by former ENERES employees, is tackling energy management by utilizing electric vehicles for renewable energy storage. This is known as the "Vehicle-to-Grid" (V2G) domain. With the growing adoption of electric vehicles, we expect an expansion in demand, and that is why we invested in REXEV early, back in 2019.
Key Technologies to Watch
The government has been advocating GX since 2022, and is making a national effort to shift to clean energy in order to achieve a decarbonized society. However, the reality is that "reduction" alone is not enough to achieve this goal.
This is where the concept of "removing" emitted greenhouse gases is attracting attention. In particular, a technology called Direct Air Capture (DAC), which separates and captures CO2 from the atmosphere, has been hot in recent years, and many players have already emerged.
Market Outlook
Currently, all companies are still focusing on "reduction" and not yet thinking about "removal". However, I recently invested in a DAC startup called Planet Savers because I wanted to make sure that when the situation evolves in the future, there will be effective DAC products on the market.
Planet Savers is a startup that develops a device to adsorb CO2 in the atmosphere by modifying zeolite, a material used in deodorizers, for DAC. First-generation DACs had the problem of requiring high-temperature thermal energy when separating CO2, but Planet Savers' device does not, and is therefore attracting a great deal of attention. In the future, there should be a variety of other DAC solutions available, and we expect the market to expand, including through government subsidies.