As sales of cameras and printers have declined, Canon Marketing Japan's VC unit has been tasked with finding new sources of revenue.
One of the earliest investments that Canon Marketing Japan, the sales and marketing company for the Japanese maker of cameras and printers, made through its new corporate venturing unit was in Finnish startup Valpas, a developer of a mechanical bed bug trapping technology for the hotel sector.
A far-flung departure from the parent company’s core products, the startup epitomises the experimental nature of its investments. Canon Marketing Japan’s CVC Mirai Fund and its venture building sister unit are structured to provide independence from the Canon parent, allowing them freedom to invent new sources of revenue.
“Our role gives us the flexibility to explore new initiatives outside the typical Canon products, while staying aligned with Canon Group’s corporate philosophy” says Ryusei Abe, group manager for research and business development.
Canon Marketing Japan’s corporate venturing origins go back to the coronavirus pandemic in 2020 and 2021 when the company started to see a drop in sales of its parent’s core products. Apple’s iPhones were eating into sales of Canon cameras, and printer sales were on the decline too.
Managers saw the need to come up with new business and turned to corporate venturing to find additional revenues for the manufacturing company, whose roots go back to the 1930s when it made precision optical instruments.
Freedom to innovate
Canon Marketing Japan set up a research and business development unit last year which includes the 10-year, ¥10bn ($68m) CVC fund, as well as the venture building division which also partners with external startups to test technologies at its business units.
While many corporates just have an investment unit as part of their corporate venturing activities, Canon Marketing Japan wanted to build its own ventures too, especially as it didn’t have a research and development function which its manufacturing parent has.
“We think it’s not enough just to invest,” says Ryota Miyake, investment manager for the Mirai Fund. “If we want to build new businesses. we have to take some initiative ourselves. Our motto is to work closely with our internal venture building team. Sometimes we start with a hypothesis and then look for startups to fill the missing piece. Other times, we find a startup which sparks new thinking on our side.
“By combining both approaches – venture building and CVC – we can stay grounded in our strategy,” says Miyake.
Canon Marketing Japan’s CVC Mirai Fund is managed by venture capital firm Global Brain. The VC looks for financial return while Canon also seeks strategic value from its investments, balancing the two competing aims.
The sectors the team invests in are intentionally broad including energy, agriculture, healthcare, food tech, edtech, hotels and leisure, femtech and pet technology.
“We explore ideas that are still very early or unclear, especially in areas like deep tech, where the commercial potential isn’t obvious yet. So, it ends up looking broad, but the real reason is that we are trying to uncover areas of long-term growth, even in places where we don’t yet have a presence,” says Miyake.
Solving social issues key to future growth
Although the venture team casts a wide net across industries, its overall thesis is to look for startups that solve social problems, some of which are specific to Japan. These include solutions to Japan’s low birth rate and ageing population, climate change, long working hours, ageing infrastructure, food shortage and the concentration of population in cities.
In the case of the Valpas bed bug startup, the technology uses a chemical-free way of trapping bed bugs inside devices that fit on the legs of beds. Hotels can also receive a certification from the startup that they use sustainable practices for eliminating bed bugs and which they can use in marketing material.
The investment fits the Canon Marketing Japan’s mission of investing in climate tech. But it also has a strategic value to the company. Canon Marketing Japan has a strong network of customers in the hotel sector through its IT solutions business, which helps hoteliers manage bookings and back-end operations. The Valpas investment allows Canon to add an extra service for these customers. The venturing team also saw an opportunity to add business lines. “The way Valpas structures their business, the actual product is something we felt we could add a new solution or new service to,” says Abe.
Technologies spawned from Japan’s ageing population is a particular focus of Canon Marketing Japan’s investments. It has invested in Aeronext, for example, a drone technology for last-mile delivery, which aims to address Japan’s shortage of transportation workers in sparsely populated areas.
Another investment area grounded in demographic change is edtech. The team invested in Smarteducation, a startup developing digital teaching materials for kindergartens and nursery schools. It is using the investment to explore business opportunities in the education sector, which is being transformed by Japan’s falling birthrate.
Analysing human emotions
Healthcare is another target sector where the Mirai Fund sees growth. The team invested in Olive, a startup that uses biometric data such as heart rate, pulse and facial contour movements to visualise and analyse human emotions. In addition to healthcare, the technology could have applications in health and productivity management, education, tourism and entertainment.
“We see a future where emotional data could help improve communication, reduce stress and support mental and physical wellbeing,” says Miyake.
The investment team work closely with the venture building team to help grow the portfolio companies’ businesses. For example, in the case of the Aeronext drone technology, it is working with the startup to create an ecosystem that will help municipalities make use of last-mile transportation. “We are trying to focus on that kind of ecosystem creation as well as business creation,” says Abe.
Looking overseas
The new business creation team focuses on partnering with startups and entrepreneurs to turn new ideas into ventures. It leverages business connections through its nationwide printer service, for example, to package startup technologies into larger solutions, which it can then sell to customers.
It also partners with government and academia in Japan and overseas to co-create businesses. Because most of Canon’s employees are based in Japan, the business creation team seeks to work with universities and startups overseas to understand how technological solutions can translate domestically as well as internationally.
Back on the investment team, Miyake says deep tech investments in areas such as quantum, space biotechnology, robotics and next generation energy solutions are on the cards, too. “These are all high risk, long term. But if we want to be relevant in 10 to 20 years from now, we need to at least start building our understanding and relationships now,” he says.
