Managing partner Tak Sato talks about insurer MS&AD’s corporate venturing unit located in Silicon Valley.
Managing partner Takashi ‘Tak’ Sato has told Global Corporate Venturing how MS&AD Ventures, the corporate venture capital (CVC) arm set up by Japan-headquartered insurance firm MS&AD Holdings, was formed and how it has evolved.
“MS&AD has operations in 47 countries but did not have an office in Silicon Valley before,” he said.
The corporate made a fund-of-fund investment in February 2017 when it backed NSV Wolf Capital, the US-based venture capital firm then known as NetService Ventures Group, to explore the Silicon Valley ecosystem, and sent delegates to the US three months later.
“My initial goal was to establish a stable partnership and relationship with startups on behalf of MS&AD Group,” Sato said. “But the startups declined even to meet me because I did not have any investments nor did I have any decision-making role, so it was a waste of time for them.
“I was able to meet a couple of startups during my stay in Silicon Valley, and I spent some time telling them how good MS&AD was as we have 47 operations globally. If a business partners MS&AD group, it will scale easily.”
The MS&AD Garage Program was launched by Sato in January 2018. It is a scheme where employees worldwide can sojourn in Silicon Valley over a period lasting for a few weeks to several months to address specific pain points they encounter in their respective countries.
Sato, however, wanted to improve the initiative and told the group executives: “I want to have skin in the game in Silicon Valley and show commitments to startups. If we want to be serious, we need a CVC unit.”
The board members agreed, and MS&AD Ventures was launched in October 2018 to form business and capital alliances with agile startups developing novel products and services that could address the increasingly dynamic market demands the company faces.
“It took us six months to kick off this initiative because of a lack of autonomy,” Sato explained. “We had a tough couple of months to hire a good managing partner who is experienced in Silicon Valley because of that – until I changed the strategy to have more autonomy.
“Prior to that, there was an investment committee of six members, five of whom were stationed in Japan, and we only had one investment vote here in Silicon Valley. We had to get approval from the headquarters to make any investment, which was quite challenging.
“Currently, we only have four investment committee members, two in Tokyo – MS&AD chief financial officer Shiro Fujii and innovation office head Satoru ‘Ted’ Shiono – plus two in Silicon Valley – Jon Soberg and I.”
Soberg is another managing partner who came on board upon the unit’s launch. It now has almost full autonomy, as the Tokyo head office only has the right of veto in the early stage of an investment discussion, which allows the unit to act quickly.
Sato said: “I was a one-man team at first, but now we have six members based in Silicon Valley.”
MS&AD Ventures was initially equipped with ¥4.5bn ($40m) and the size was tripled to ¥13.5bn ($128m) in August this year. The unit invests primarily in developers of innovative risk, insurance and financial technologies and new business models. It participates at seed to series B-stage with a ticket size between $500,000 to $3m per deal, focusing on both financial and strategic returns.
Sato confirmed that the unit has already funded more than 20 startups in eight months, including Germany-based, pan-European licensed insurtech company Element, enhanced speech recognition technology developer i2x, US-headquartered weather analytics software provider Jupiter and Israel-based cybersecurity software developer VDoo.
“We want to show our speed and our global autonomy to the market,” he said. The unit prefers to concentrate on risk-focused technology rather than direct insurtech, “supplying peace of mind and security – because natural disaster brings a serious disruption to society”.
Moving forward, Sato aims to obtain a good strategic return for the corporate and reinforce the Garage Program to discern pain points in MS&AD’s offices worldwide. By working extensively with innovative startups, “we just might create a next-generation insurance company,” he affirmed.
Photo courtesy of Tak Sato.