Supporting Startups with "Investment × Hands-on Guidance"! Dentsu Inc.'s Fund Launches

Dentsu Group's corporate venture capital arm, Dentsu Ventures, and Dentsu Inc.'s Startup Growth Partners (SGP), which supports startup companies. These two organizations will officially begin full-scale joint operations starting April 2023 with the "SGP Fund" (Dentsu Ventures SGP Investment Limited Partnership).

Its defining feature is the comprehensive, long-term support for venture companies' growth, leveraging the Dentsu Group's abundant resources to the fullest—not just through investment. Dentsu Ventures Managing Partner Yasutaro Sasamoto and SGP Managing Director Hajime Yamamoto shared their vision for the full launch, specific support details, and future outlook.

The needs for startup growth support are diversifying.

──First, please tell us about your backgrounds.

Sasamoto: I handled marketing and sales at Dentsu Inc., then transferred to the Corporate Planning Office after studying abroad. I was involved in investing in domestic and international startups and developing new businesses. In 2015, I participated in launching Dentsu Ventures, the corporate venture capital arm, and have been here ever since.

Yamamoto: I joined Dentsu Inc. as a sales representative handling major cosmetics companies, beverage manufacturers, and game companies. From 2019 to the end of 2021, I served as Executive Vice President overseeing business operations at D2C Inc., a joint venture between NTT DOCOMO and Dentsu Inc. Since January 2021, I have been the Head of Organization at Startup Growth Partners, which supports startup growth.

──I understand the SGP Fund began full-scale operations in April 2023. What exactly is the SGP Fund? Could you also explain the background behind its launch?

Sasamoto: In a nutshell, it's a "Venture Capital (VC) × Hands-on Growth Support" initiative. While we've provided various forms of support to portfolio companies through the two funds previously managed by Dentsu Inc., this new fund was launched specifically to strengthen our hands-on growth support in a more specialized and comprehensive manner, particularly through collaboration with SGP.

A current trend in the startup industry is the diversification and sophistication of needs regarding growth support. Driven by the emergence of new technologies and the resulting rapid changes in industry structures, diverse and sophisticated needs are emerging in areas like marketing, sales, and partnership approaches.

In response, the solution-providing capabilities of VCs themselves are also evolving. While US VC firm a16z is often cited as a pioneer, there is an accelerating trend where VCs, beyond their core role of providing capital, are also offering specialized solutions in areas like HR, marketing, and sales support.

On the other hand, it is also true that various challenges have been pointed out regarding the "business model combining investment with specialized growth support." Key points of debate include: "How should the additional costs of solution provision be structured, and who should cover them?", "Could conflicts of interest arise between the investor and solution provider roles?", and "Might reliance on outsourcing hinder the portfolio company's own capability development?" Our current understanding is that, within this context, various players both domestically and internationally continue to experiment and refine their approaches.

We believe these issues can be resolved through careful design, and the SGP Fund was established to advance this effort in earnest.

Our strengths lie in "thorough accompaniment" and "accumulated investment expertise"

──Could you tell us about the unique strengths of the SGP Fund?

Sasamoto: We have always supported our portfolio companies by leveraging the Dentsu Group's wide range of solutions. However, as mentioned earlier, the needs of startups are constantly changing, and we felt the necessity to continuously evolve the solutions we provide to meet those needs.

Therefore, one of the SGP Fund's objectives is to accurately understand the limitations of Dentsu Inc.'s existing solutions and actively develop new solutions that startups need today. While delivering tangible value through immediate support remains a fundamental premise, our ideal is to collaborate with our portfolio startups to develop new solutions that also contribute to the evolution of the entire industry.

Our strength lies in organically combining the investment expertise accumulated at Dentsu Ventures with SGP's expertise in providing solutions to startups. While many players continue various challenges in this field, we plan to evolve our value proposition as a unique Dentsu Inc. initiative, learning from various stakeholders along the way.

Yamamoto: As Sasamoto mentioned, the SGP Fund aims to be an initiative that leverages Dentsu Inc.'s tangible and intangible assets to support startup growth in every conceivable way. The Dentsu Group's assets include extensive industry knowledge and a robust network built through long-term relationships with thousands of clients.

In terms of talent, we have thousands of professionals—strategic planners, creatives, consultants—enabling us to provide high-quality services on an Always On basis. We particularly focus on creativity, data utilization capabilities, and methodologies and products. Furthermore, while we at SGP are a group of business producers, our strength lies in our execution capability. We integrate the diverse talent, latest methodologies, and tacit knowledge of the Dentsu Group to comprehensively realize executive support through close collaboration.

Business Producers have been at the forefront, supporting national clients with end-to-end assistance spanning management, business operations, marketing, and the entire value chain. We've consistently prioritized the client, thinking hard and accompanying them every step of the way. SGP is the new organization launched in 2021, formed primarily by members who gained experience on this front line.

The SGP Fund is not just about investing; we strongly believe in providing "end-to-end support as a partner to startups." We sweat together on the "how do we actually do this?" part for business growth. That's what sets us apart from other venture capital firms.

Developing solutions across 18 domains to "create business momentum"

──Are there specific fields you want to focus on, or target stages?

Yamamoto: We don't limit ourselves to specific fields. Dentsu Inc. itself works with diverse clients across all sectors and has numerous specialists in each area. We similarly want to engage with startups from a wide range of industries.

However, we do want to partner where our value can truly shine. We seek startups that resonate with our talent, solutions, and the direction of our new developments—those who recognize our value. We want to walk alongside startups where the chemistry is right, or rather, companies where we can have substantive discussions with their CXOs.

Regarding startup phases, we haven't set strict boundaries, but we anticipate focusing primarily on early to mid-stage companies. We want to engage with startups poised for accelerated growth or those lacking key assets, enabling them to leverage our diverse resources.

While we use the term "support," we absolutely do not approach this with a high-handed attitude of "we're going to make you grow." To reiterate, we strongly desire to "grow together" and "be a force for good." The potential, mindset, and passion inherent in startups are truly remarkable. We want to form partnerships with companies we can learn from and inspire each other with, continuing to take on challenges together for the long haul.

──Could you tell us about the specifics of your support? What areas do you focus on when providing assistance?

Yamamoto: One key area is "building business momentum." A major concern for startup founders is how to accelerate growth and, consequently, increase company value. Business momentum significantly impacts this. We want to provide comprehensive support across all aspects—marketing strategy, execution, creative, analytics, customer negotiations, sales, IR—to build solid momentum and accompany them until their service or product achieves widespread market penetration.

Next, we want to focus on "business concept and management strategy support." Among the support we provide, we sense a high demand from founders for solutions to HR and organizational challenges, such as "building a strong organization where top talent naturally gravitates toward" or "creating a self-sustaining, robust organization." We see our support extending to co-creating MVV and business concepts, translating them into concrete plans with quantitative goals, developing action plans, and sometimes embedding them into internal systems. We also assist in permeating these activities throughout the organization or communicating them externally.

Another area we want to focus on is "communication with the market and investors." Startup founders all possess amazing technology and passionate vision. However, it's often difficult for the market and investors to see how this will grow or what value it holds. We want to help organize that communication and ensure a solid approach to the capital markets.

──Earlier you mentioned wanting to "develop new solutions." What specific types of solutions do you envision developing?

Sasamoto: As a current hypothesis, we've defined 18 focus areas and are exploring various solution developments. This project is challenging for Dentsu Inc. as well. It has a strong experimental aspect, so we're identifying areas that align well with Dentsu Inc.'s resources and prioritizing which solutions to develop.

Specifically, this includes leveraging Dentsu Inc.'s client network to support sales alliances, assisting with equity story development for fundraising, and building/operating growth loops that incorporate creative interventions. Drawing on overseas examples, we aim to develop and refine these within our actual portfolio company support initiatives. Ultimately, we hope to expand them broadly as a universal service package.

Yamamoto: Our goal is to provide ongoing support, drive growth, and deliver tangible results. Therefore, we aim to derive compensation for providing these solutions to portfolio companies primarily from the outcomes of that growth. Regarding the compensation structure for SGP's operations, we intend to be flexible, tailoring it to the stage and circumstances of each startup.

Connecting startups with large corporations to create positive change

──What is the background behind Dentsu Inc. now fully launching the SGP Fund?

Yamamoto: The SGP was originally launched when employees supporting startups in sales and marketing areas took the initiative to form a cross-functional team. They believed that "rather than each working individually with clients, collaborating would allow us to provide higher-quality services to startups." Subsequently, younger employees proposed formalizing this approach to the company, leading to its current structure through a bottom-up process.

I believe this proposal was realized partly because Dentsu Inc. itself was undergoing a period of change. Today, the world is changing rapidly. Topics like Web3.0, generative AI, and climate change are emerging one after another, transforming the environment and rules surrounding companies, as well as the nature of marketing itself. To contribute to such a society, companies must change. Dentsu Inc. is also undergoing significant change, expanding its business beyond advertising, marketing, and creative services into management domains. I believe Dentsu Inc.'s direction and SGP's direction aligned.

──Could you share the significance of Dentsu Inc.'s involvement with the SGP Fund?

Sasamoto: As Yamamoto mentioned, this is an era where Dentsu Inc. and, indeed, many large corporations worldwide need to undergo significant updates. Collaborating with startups is incredibly important in this era – something I've personally realized over the past seven to eight years managing Dentsu Ventures.

While we certainly want to leverage Dentsu Inc.'s expertise to support startup growth, the significant contribution that startups' technological capabilities and mindset can make to solving challenges faced by large corporations and Japanese society is also a major factor. In terms of "connecting" and "serving as a hub," we believe there is great significance in us undertaking this project, having accumulated insights by engaging with both large corporations and startups.

Yamamoto: We don't want it to be a case of investing and then saying goodbye after a set period. We want to evolve alongside them and run alongside them. Supporting startups to properly build their capabilities is also one of our missions. We want to be a long-term partner for startups, supporting them through growth, reaching their goals, and beyond to self-sustainability.

*Startup Growth Partners press release available here