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No. 366, March 2000

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Japanese Companies in the US


FINANCIAL SERVICES

The first nationally chartered Internet bank, Houston-based COMPUBANK, N.A., raised $36 million in its initial round of institutional financing. SOFTBANK FINANCE CORP. led the fund-raising, in which three major U.S. financial services providers also participated. Year-old CompuBank offers the same variety of depositary products and services to businesses and consumers that conventional brick-and-mortar banks do, plus the convenience of on-line banking and the higher interest rates on deposits and lower fee charges made possible by the absence of a physical presence. The Internet bank will use the money raised to expand its customer base as well as operations and to build up its capital.

One of the start-ups attempting to use the Internet to democratize investment banking by making initial public offerings and similar investments accessible to individual investors has caught the eye of another SOFTBANK CORP. affiliate. SOFTBANK VENTURE CAPITAL joined a number of other name venture capital firms in raising $52 million in follow-on financing for E*OFFERING CORP. of San Francisco. E*TRADE GROUP, INC., an initial investor in the 13-month-old business and another company in which Softbank has a stake, also invested. Along with partner E*TRADE, E*OFFERING participated in 47 public offerings in last year's fourth quarter alone. It will use the new capital mainly to expand its on-line products and to continue the development of its technology infrastructure.

SOFTBANK FINANCE CORP. agreed to help raise as much as $100 million for TRADESCAPE.COM, INC., a provider of so-called active stock trading systems for professional traders, institutions and active on-line investors that is in the process of acquiring MARKETXT, INC. Backed by a number of big brokerage houses, the latter organization is a recently authorized ECN (electronic communications network) that offers extended-hours trading for individual investors. New York City-based TRADESCAPE.com, in which Softbank Finance already is the largest investor, sees the combination as critical to maintaining its position as the leading provider of alternative trading systems for all equity market participants. Through its trading platform, registered broker/dealer subsidiary and third-party licensing arrangements, TRADESCAPE.com executed more than 150,000 trades a day with a volume in excess of 40 million shares in December. It will use the money from Softbank Finance and other investors to accelerate growth into the active on-line and institutional markets and for further technology development.

Continuing to build a name for itself as a venture capitalist, HIKARI TSUSHIN, INC. was one of a number of new institutional or private investors that joined previous investors in raising $27 million for GARAGE.- COM. The Palo Alto, California firm helps promising early-stage entrepreneurial businesses find financial backers in the venture-capital, corporate and "angel" investor communities. By its count, Garage.com has been instrumental since the start of 1999 in generating more than $100 million for 40 technology start-ups through its wholly owned broker/dealer subsidiary.

To facilitate its search for possible partners among the vast number of U.S. start-ups in the information technology field, NTT COMMUNICATIONWARE CORP., the software development unit of NIPPON TELEGRAPH AND TELEPHONE CORP., invested $5 million in the just-closed Bay III fund. Run by BAY PARTNERS, the $200 million Bay III fund is the Cupertino, California firm's newest early-stage venture-in- vestment fund. On average, Bay Partners invests between $2 million and $3 million in entrepreneurial firms ready to bring their ideas to the market. Like similar operations, it also provides strategic consulting, mentoring, executive search and financial planning advice.

Trader NISSHO IWAI CORP. is an established investor in up-and-coming American IT firms through a unit of its main New York City subsidiary. However, it decided to sharpen the focus of these activities by forming GLOBE LINQ, LLC as an independent business unit of its affiliate. The new company has approximately $30 million at its disposal. Like other venture-capital firms, it provides not only financing to promising start-ups but also managerial and operational support. What sets Globe LinQ apart, Nissho Iwai says, is that it is positioned to help the businesses in which it invests to break into foreign markets, particularly Japan. At least two examples back up this claim. The trader is the Japanese distributor for SONUS NETWORKS, INC. (see Japan-U.S. Business Report No. 358, July 1999, p. 35), a Westford, Massachusetts supplier of products for the Voice-over-Internet Protocol market in which Globe LinQ has a $3 million stake, while a subsidiary represents software developer XAACT TECHNOLOGIES, INC. (see Japan-U.S. Business Report No. 365, February 2000, p. 25); Globe LinQ invested $1 million in that Santa Clara, California firm.

OMRON CORP., best known as a manufacturer of automated control components, is following the same course, although not in such an institutionalized way. It has given a three-person team within OMRON ADVANCED SYSTEMS, INC. in Santa Clara, California responsibility not just for identifying promising North American IT start-ups but also for making the decision to invest. The group will have at least $18.3 million a year with which to work, but Omron could make as much as $91.7 million available annually if circumstances warrant. The team's primary decisionmaking criterion is to invest in companies that will help Omron expand its own IT operations either directly or through technology transfers rather than to seek capital appreciation. In the last three years, Omron has invested $22.9 million in North American start-ups.

Along with STANDARD & POOR'S CORP., the Tokyo Stock Exchange, the New York Stock Exchange and Germany's Deutsche Boerse are launching the first global stock index fund. As its name indicates, the S&P Global 100 Index will mirror the performance of the 100 multinationals making up the index. This select group incorporates 12 Japanese companies, including SONY CORP. and TOYOTA MOTOR CORP., 30 American corporations, such as AMERICA ONLINE, INC., GENERAL ELECTRIC CO., INTEL CORP. and MICROSOFT CORP., and DAIMLERCHRYSLER AG plus 41 other European businesses. Together, they represent roughly one-fourth of the world's total equity market capitalization. The fund's shares will trade on all three participating stock exchanges, enabling virtually round-the-clock trading. The S&P Global 100 Index is expected to appeal mainly to institutional investors.

An exchange rate of ¥109=$1.00 was used in this report.aaaaaa

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