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No. 364, January 2000

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Japanese Companies in the US


In one of the highest-profile investments yet made by SOFTBANK CORP. or its affiliates in American Internet start-ups, SOFTBANK VENTURE CAPITAL is partnering with KMART CORP. to help the number-three U.S. retailer build an electronic-commerce presence. Aptly named BLUELIGHT.COM, in which Kmart has an approximately 60 percent stake, will give consumers free Internet access and personalized portal and messaging pages as well as the opportunity to shop on-line. Softbank Venture Capital will back the San Francisco-based company with an investment of $62.5 million. SPINWAY, INC. of Palo Alto, California, which provides businesses with cobranded or private-label free dial-up Internet access to enable them to drive traffic to their sites and broaden brand identity, will be the source of BlueLight.com's Internet connections. Personalized services, including Yahoo!Mail and Yahoo! Messenger, as well as news, sports and weather will be offered by big portal operator YAHOO! INC. under the My Yahoo!/BlueLight.com name. MARTHA STEWART LIVING OMNIMEDIA, INC., which already has a retail partnership with Kmart, will make an unspecified investment in BlueLight.com. The site is expected to be fully functional by late spring or early summer 2000.

Although eager to help Internet firms with promising ideas and sound business plans get off the ground, SOFTBANK VENTURE CAPITAL often is prepared to provide additional funding to businesses it backed initially. A case in point is ANYDAY.COM, INC., which allows people to organize their personal and professional lives on-line. Mountain View, California-based Softbank Venture Capital and another big U.S. venture-capital fund supplied $8 million last spring to enable AnyDay.com to get started (see Japan-U.S. Business Report No. 357, June 1999, p. 10). Now, the two financing sources have invested another $12.5 million in the Cambridge, Massachusetts firm to facilitate its growth.

On-line entertainment and music businesses, particularly those that use streaming media technologies, are one focus of another major Japanese investor in Internet start-ups, TRANS COSMOS INC., and its Bellevue, Washington subsidiary. Two of the American unit's latest investments are in this category. It put $5 million into SOUNDSBIG.COM, INC., a Boston-based company that is building a comprehensive Internet broadcast network. At its Web site, listeners can find both established and emerging artists, chat with other listeners, get free MP3 downloads and buy CDs, while artists can connect directly with their fans. Trans Cosmos' U.S. unit also joined two other venture-capital firms, one of the world's biggest record companies and AMERICA ONLINE, INC. in a second round of financing for RIFFAGE.COM, INC. that raised $21 million. The Palo Alto, California firm will use the money for promotion and for emerging technologies that will further expand its site, which specializes in music by new bands and artists worldwide.

TRANS COSMOS INC.'s Bellevue, Washington unit also put up $1 million of the $3 million in seed money for ACADIO CORP. In early 2000, the Seattle company will launch a Web site for continuing education. It will offer a broad range of professional education and personal learning products and self-study materials as well as evaluation tools.

The newest investment by HIKARI TSUSHIN, INC., which rapidly is making a name for itself as a provider of start-up funding for Internet businesses and developers of communications software, adds a different dimension to its portfolio. The cellular phone distributor partnered with three other investors to raise $12.9 million in second-round financing for GLOBAL SIGHT CORP. Located in San Jose, California, this company gives firms the infrastructure, process and linguistic technologies to transform their English-language Web sites into multilingual, multicultural Internet presences. Global Sight earmarked the additional money for international expansion, product development and consulting and technical support services.

The amount was just $500,000, but this investment in NEED2BUY.COM, INC. introduced trader MITSUBISHI CORP. to the fast-expanding business-to-busi-ness on-line marketplace. The Westlake Village, California company's Web site, which currently is devoted to industrial electronic components, enables buyers to post requests for quotations for specific products. Need2Buy. com then uses a proprietary expert system to solicit bids from multiple vendors that meet the criteria specified in the RFQ. At present, more than 1,000 manufacturers of electronic components are directly linked to the site. The company also maintains a data base of all franchised distributors of electronic components. In conjunction with its investment, Mitsubishi agreed to help Need2Buy.com move into the Japanese market. The details still must be worked out, though. The money raised from Mitsubishi was part of a $2.2 million first round of financing for Need2Buy.com, which has been operation since May 1999.

MITSUBISHI CORP. also joined a group of firms that provided a total of $15.5 million in mezzanine funding for application service provider KINZAN. COM. Recently spun off from Internet services provider IXL, INC., Carlsbad, California-based Kinzan.com is the supplier of the Siteman family of software and services. This package gives large organizations centralized control over extended networks of locally created e-com-merce Web sites. Kinzan.com's main targets are the business-to-business and business-to-consumer markets.

Cementing their relationship, ITOCHU TECHNO-SCIENCE CORP. invested an undisclosed amount in NETTECH SYSTEMS, INC., a supplier of middleware for mobile devices. Since last fall, CTC, as it often is called, has been the exclusive distributor in Japan of the Princeton, New Jersey firm's products. These enable anytime, anywhere mobile access to the Internet and enterprise data from any type of wireless device (see Japan- U.S. Business Report No. 361, October 1999, p. 32). As part of the latest deal, Nettech Systems bought Itochu Techno-Science's MobileWare division, which is a developer of complementary mobile middleware. No details were released about this transaction, either.

Four Japanese companies that see a market at home for EGROUPS, INC.'s Internet- based group communications services participated in a round of mezzanine investment that raised $42 million for the San Francisco business. Most of this money came from a group of big venture-capital funds, but the combined amount provided by publisher IMPRESS CORP., NTT-ME INFORMATION XING, INC., NOMURA SECURITIES CO., LTD. and RECRUIT CO., LTD. apparently was not inconsequential. eGroups currently serves more than 14 million people and hosts in excess of 280,000 e-mail affinity groups that exchange 1.4 billion-plus e-mails per month. It is adding new members at the rate of 1 million every 20 days. Last summer, eGroups established a subsidiary in Tokyo (see Japan-U.S. Business Report No. 358, July 1999, p. 26). It reportedly is signing up members at a fast clip for its Japanese-language on-line services.

Through its Panasonic Digital Concepts Center in Cupertino, California, MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. joined a number of high-profile investors, including SOFTBANK VENTURE CAPITAL, in putting an undisclosed amount of money into VSTREAM, INC. The Louisville, Colorado company offers collaborative Internet tools for businesses, such as on-demand conference calls, Web presentations and Webcasts. Vstream will use the PDCC money, which boosted its total financing to $100 million, to bolster its international expansion. The two also will explore opportunities to deliver Vstream's next generation of communications services to businesses and consumers worldwide.

A technology alliance among FUJITSU, LTD., San Jose, California-based SECURE COMPUTING CORP. and CYBER SIGN, INC., also located in San Jose, will provide government, finance and the B2B market with high-level but easy-to-use authentication security. Under the tie-up, Fujitsu is creating an application that seamlessly integrates the Cyber-SIGN handwritten signature biometric verification technology with Secure Computing's SafeWord authentication server. The software uses Cyber-SIGN authenticated handwritten signatures to invoke the SafeWord dynamic password, thereby providing strong security and local management of users accessing corporate extranets. Cyber SIGN is owned by Tokyo's CADIX INC.

In its second big transpacific business deal in as many months, KONAMI CO., LTD., the top publisher of interactive entertainment software in Japan, will market worldwide current and future interactive games developed by the Universal Interactive Studios division of UNIVERSAL STUDIOS, INC. All the games will be based on Universal Studios franchises. First up will be titles featuring story lines or characters from "The Mummy," "Universal Studios Monsters," "Dr Seuss' How the Grinch Stole Christmas" and "Woody Woodpecker." The games will be designed for multiple platforms, including the Sony PlayStation, the Sega Dreamcast, various Nintendo consoles and PCs. The deal will extend UIS's distribution reach since Konami has ties to all the main makers of video game machines. Konami recently agreed to produce a line of ESPN sports titles for video game consoles and PCs (see Japan-U.S. Business Report No. 363, December 1999, p. 12).

An exchange rate of ¥103=$1.00 was used in this report. aaa

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