The story of how we ended up selling a new business we built at Dentsu Inc. to a venture company. (Part 2)

In business, failures are bound to outnumber successes. With that in mind, I wrote an article titled "#A Dentsu Inc. Employee's Failures" about my own actual failures.

In this second part, I want to talk about the subsequent developments of a "new business" that has now reached its 10th year since launch, and the lessons learned from it.

*This article was edited by Web Dentsu News based on an article originally published on Nikkei COMEMO.
Read the Nikkei COMEMO article here

The New Business Project We Kept Going Along

Ten years ago, we launched this new venture with great enthusiasm, but its presence gradually faded—both within the company and in my own mind.

・It generates little direct revenue, but
・It had some positive impact on existing businesses
・It didn't require significant maintenance costs

So, I figured I'd just keep it going on a small scale.

That's the position it's in.

In fact, the app business I launched for college students, called " Circle Up," never scaled significantly. However, it did have the benefit of supporting club activity funds by responding to corporate offers, and it gained 5,000 to 8,000 new users every year.

However, a turning point suddenly arrived for such a service.

The decision was made to effectively withdraw from its management.

It wasn't a new venture suited for a large corporation's scale.

The catalyst was GDPR, which originated in Europe.

※GDPR fines hit ¥37 billion: Three years after implementation in Europe, UK office reports
https://www.nikkei.com/article/DGKKZO73505120S1A700C2TCJ000/

The impact of GDPR, Europe's strict personal data protection rules, is beginning to grow significantly for Japanese companies.

Consequently, within Dentsu Inc., its personal information initiatives were strengthened.

Projects handling personal information were identified, and the first to come under scrutiny was the "Circle Up Project" I was working on.

While it had been considered acceptable under previous rules, the decision to tighten personal information regulations made it clear the project couldn't continue as is.

We were presented with two options:

① Strengthen personal information measures and continue as a special exception
② Withdraw from the project or sell it to another company

This was a project I'd run for nine years. Naturally, I first explored Option 1.

However, it quickly came to a halt.

The reasons were cost and speed.

To solidify the system to the company's required standards would demand significant development and maintenance costs, exceeding what our current business scale could cover.

Furthermore, we knew that undertaking such modifications would hinder future development. Specifically, it concerned the approval process when attempting to change the development environment.

For example, if we wanted to introduce a new tool into the development environment, we'd have to determine what tools it would integrate with, what the risks were, what countermeasures were needed, whether contracts were required, and then undergo multiple reviews by the department monitoring development before any introduction could be approved. The new rules mandated such a strict process.

Of course, this is a necessary action for the company.

However

・Costs increased
・Speed would decrease

Ultimately, continuing this way would clearly diminish the service's competitiveness within the company, meaning the business would face difficulties.

Reluctantly, I began exploring option ②.

In the end, "selling it was the right decision."

Since the service was steadily gaining users, albeit modestly, a buyer was found quickly.

Its unique feature of being "exclusively for university students" attracted a company specializing in recruitment services, which acquired the service from Dentsu Inc. to launch as its own new venture.

*Acquired management rights for "Circle Up," a Gen Z community service developed by Dentsu Inc.
https://prtimes.jp/main/html/rd/p/000000047.000033607.html

My nine years were sold off to another company in the blink of an eye.

As the founder, I now support the service I launched from outside the company in a growth support role. Ultimately, I feel it was a good decision to sell.

The buyer is a venture company, so acquiring Circle Up was a major decision for them. When the company changes, so does how it's treated.

Now, many employees at the acquiring company are involved in the Circle Up business.

And above all, the speed of decision-making and execution is fast. Without paperwork or groundwork, the service keeps evolving based on the judgment of the president and the person in charge.

What would take three months at Dentsu Inc. gets done in about a week.

Of course, there are risks inherent in that approach, but for a service of this scale, it's probably sufficient.

"I wish we'd done this sooner."

Lately, I've even started thinking that.

Could reverse EXIT transform Japan's major corporations?

What do you think?

This is my reverse exit story.

I didn't make a huge profit from the sale, and considering the labor costs for the nine years I was involved, I personally think it was a failure as a new venture for Dentsu Inc.

But perhaps this model could become a template for Japan's major corporations.

A well-funded company launches it, and a venture company nurtures it.

The financial risk lies with the large corporation, but the venture company shoulders the operational risks, including compliance. As the "creator," the large corporation can negotiate certain priority rights regarding the business during the sale process.

Because they are involved from the very beginning (0→1) rather than joining a mature startup midway, the relationship is likely to be deeper.

This model also benefits large corporations in terms of employee growth.

Personally, after the sale, I gained the ability to communicate directly with engineers overseas. Having worked at this company for so long, I now experience stimulating days. I'm also able to leverage the startup's speed within existing operations.

This new form of exit, different from the traditional "startup → large corporation" path, may transform Japanese corporations and even their employees.

If my humble experience can contribute to that, I couldn't be happier.