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No. 366, March 2000

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Japanese Companies in the US


Two SOFTBANK CORP. venture-capital funds threw out a $57 million lifeline to TOYS "R" US, INC.'s struggling on-line retail business. TOYSRUS.COM generated a tremendous amount of negative publicity when it was unable to deliver in a timely manner all the orders that had flooded into its site before Christmas. However, SOFTBANK VENTURE CAPITAL and SOFTBANK CAPITAL PARTNERS LP, which acquired an undisclosed minority position in Toysrus.-com, apparently looked beyond those problems and saw a company that has one of the world's most recognizable brand names and that, in their opinion, is positioned to become the global leader in children's products sold over the Internet. Toys "R" Us said that the Softbank money would be used to accelerate the development of Toysrus.com's infrastructure to support future growth. The same use will be made of the capital that the company received from three other U.S. private equity firms. As part of the Softbank deal, its two venture-capital funds bought warrants at a cost of $10 million to acquire 1.2 million shares of Toys "R" Us common stock at $13 per share.

SOFTBANK CAPITAL PARTNERS LP, which operates out of Newton Center, Massachusetts, also invested $31 million in ODIMO.COM (formerly Diamonddepot.com), which bills itself as the largest source of certificated diamonds, fine jewelry and brand-name watches on the Internet. The Fort Lauderdale, Florida-based company is majority owned by THE STEINMETZ DIAMOND GROUP, an international diamond trading organization. It and Odimo.com's other original investors put another $5 million into the firm. The diamond and jewelry e-tailer will use the $36 million to expand into Japan and Europe with help from SOFTBANK CORP.

For its part, SOFTBANK VENTURE CAPITAL of Mountain View, California led a second round of financing for REELPLAY.COM that raised more than $4.5 million. Launched in October 1999, the Santa Monica, California start-up is positioning itself to become the leading B2B on-line marketplace for the film and TV industry. It provides a forum for buying, selling and marketing motion pictures and television programming. To date, Reelplay.com has assembled a data base of more 5,000 new film and TV products from 1,000- plus film and television production and sales companies. It also has created unique Web sites for these properties. The company will use the new financing to continue its expansion.

A third round of fund-raising for TRAININGNET INC., which specializes in helping companies with skills training and professional education, generated $33.7 million, including money from new investor HIKARI TSUSHIN, INC. The Billerica, Massachusetts company will use the capital to both broaden and deepen operations in order to strengthen what it says is its top ranking in the on-line B2B marketplace for professional training. TrainingNet makes its products and services available through a variety of means: corporate intranets, the career sections of high-traffic Web sites, business and professional-oriented Web sites and its own Web site.

HIKARI TSUSHIN, INC., Japan's top distributor of cellular phones, also joined in a second round of financing that generated $27 million for FLOOZ.COM, INC. The New York City company is the creator of the Internet's Flooz gift-giving currency. Sent by e-mail, the "money" can be spent at more than 60 Floozworthy on-line stores. Flooz.com also offers a free, personalized reminder service for special occasions. The business will use the new capital to expand its sales and marketing efforts as well as to accelerate product development.

Other Japanese companies occasionally are willing to risk a few million dollars on pre-IPO companies in the hope not only of racking up capital gains but also of expanding their activities at home by partnering with the start-up. For instance, NISSHO ELECTRONICS CORP. participated in a $22.8 million third round of fund-raising for PROACTIVENET, INC. The Santa Clara, California firm is in what is known as the e- business transaction performance management field. Its recently announced eBiz.Site and eBiz.SP "intelligent" management solutions help Web-site operators improve the reliability and the performance of their sites in real time. ProactiveNet will use the proceeds from the latest financing round for sales, marketing and product development efforts. The company describes Nissho Electronics as its business partner in Japan, although to date, no plans have been finalized for ProactiveNet to move into the Japanese market.

Through its GLOBE LINQ, LLC information-tech-nology investment unit, NISSHO IWAI CORP. put up money for BIGFOOT INTERACTIVE during the direct e-marketing solutions company's latest round of funding. The investment in the New York City business, a unit of BIGFOOT INTERNATIONAL, INC., was a prelude to bringing Bigfoot Interactive's services to Japan. Under a licensing agreement, Nissho Iwai will introduce in April a Japanese-language version of its new partner's secure, Web-based software for creating and executing personalized, real-time e-mail marketing campaigns. Industry sources say that the trader and Bigfoot Interactive could form a Japanese joint venture as soon as this fall.

In a parallel move, NISSHO IWAI CORP. joined other investors in a second round of funding for ZKEY.- COM that totaled more than $14.2 million and announced plans to introduce the Los Angeles company's simplified and secure information exchange, storage and retrieval service in Japan in the spring. Zkey.com's ambition is to use its core technologies to make Internet-based content the standard medium for all information-exchange procedures. For the Japanese market, Nissho Iwai will localize some functions of the Zkey Web site.

With an eye on the rapid growth of Internet-ena-bled mobile phones in Japan, MITSUBISHI CORP. and its MC CAPITAL INC. investment banking unit put up funds for the first major outside round of financing undertaken by DEJIMA, INC. The Mountain View, California start-up is the developer of the AASAP (adaptive agent software architecture platform) technology for natural-language command and control of both fixed and wireless Internet applications. The two Japanese companies see considerable opportunity for Dejima's AASAP at home because this interface makes it easier for Internet services providers to deploy wireless data services and for consumers to access them.

A Tokyo start-up that specializes in developing software for the eXtensible Markup Language that plays such a key role in e-business activity has formed a marketing subsidiary in Beverly, Massachusetts. The INFOTERIA INC. unit, which is staffed initially by six people but could have as many as 20 employees in a year, not only will handle sales but also will gather information on Internet technical developments that could be used to hone its parent's software. Infoteria hopes to produce 30 percent of its projected FY 2000 sales of $4.6 million in the United States.

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

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