New Hybrid Venture Capital Category for Nikko Securities
Nikko Securities (a member of the Sumitomo Mitsui Financial Group) wanted to create a new US-based venture capital fund, but they were unsure how to offer something that was truly different and valuable within the crowded VC community. Warren Schirtzinger at High Tech Strategies guided Nikko to a new approach called hybrid venture capital.
The Challenge
A tech startup’s international reach is typically limited by a lack of understanding about how to conduct business outside North America. And venture capital funding does not automatically solve that problem.
Many startups need both money and the expertise required to market products in Europe or the Far East. This combination of resources is called hybrid venture capital. Nikko’s goal was to establish the first hybrid VC fund in the U.S.
Venture Capital Ecosystem
To achieve their goal Nikko needed to learn about venture capital investing practices in the United States, and build a team of highly-skilled investment managers and analysts. But their biggest challenge was “fitting in and standing out.” They needed to co-invest with established VCs in the US and offer something that was both different and highly valuable.
- Alignment with VC ecosystem. The reaction of the VC community to Nikko’s initiative would have a significant impact on how the new organization is perceived.
- Become part of the deal flow. Nikko had to find ways to get involved in the early funding process of software companies that hold the greatest potential for success.
- Build ongoing awareness. Nikko needed to maintain ongoing awareness to ensure influential business advisors—bankers, lawyers, accountants, etc.—would know when to call or recommend Nikko.
The Solution
Nikko Securities announced the formation of a new US-based organization, EnCompass Ventures, to help emerging software companies successfully adapt and sell their products in Japan.
To ensure the success of that new organization, Nikko asked Warren Schirtzinger to introduce their new management team to all of the successful and high profile venture capital firms in the Northwest. Warren then provided a blueprint of typical software-startup funding practices, along with a comprehensive compensation survey.
The Results
The first fully-integrated hybrid venture capital fund
Nikko Securities’ mission is to provide the complete spectrum of resources a software developer needs to achieve success in Japan –language expertise, translation, localization, distribution, marketing, product design, and investment funds.
Nikko established the resources and capability to help software companies with an entire range of business expansion services, from early stage funding and product design assistance to full-scale marketing and distribution in Japan.
High Tech Strategies’ Contribution
- Contacts and references in the venture capital community. To establish relationships with key members of the VC community, High Tech Strategies set up meetings with leading venture capital firms in the Northwest as well as California.
- Preparation of introductory materials. High Tech Strategies also prepared and selectively distributed an information packet to influential members of the investment community, prior to announcement.
- VC operations support. Warren and his colleagues provided information, counsel and support for Nikko’s early-term needs. This included research data from salary and compensation surveys, and systematic testing of how well various external audiences understand Nikko’s mission.
The Impact
Nikko’s venture capital organization, called EnCompass Ventures, is believed to be the first true “hybrid” venture capital fund, providing a ready-made solution for emerging high-tech companies needing to successfully adapt, sell and distribute their products in Japan.
Software Industry Expansion
The Japanese market represents a significant opportunity for software developers to increase sales and build a worldwide presence. However, adapting software products to the language and cultural requirements of foreign markets involves a complex and time consuming process of translation and re-engineering. In many cases, a simple translation of the product is inadequate; language-specific features must be added.
- Value-added venture capital. Emerging software companies are now able to successfully adapt and sell their products in Japan.
- Faster time to international sales. Encompass Group can help ensure the success of emerging software companies by giving them unique advantages in Far East markets.
- Development partnership. Nikko’s new organization acts as a development partner; a company with engineering, design, programming and training resources that also has financial resources available to fund marketing and development activities.
