Contents

Kuwabara : Ms. Matsuoka, COO of QunaSys Co., Ltd., and Mr. Seko, COO of Kyoto Fusioneering Co., Ltd., visited us as people suitable for this theme. Both of them are active in positions of extremely important and significant business development for deep tech startups, and from the viewpoint of open innovation, which is today's theme, they are in charge of everything from drawing big strategies for collaboration with large companies to actually concretizing and collaborative synergies, so I expect you to talk ABOUT YOUR VARIOUS EXPERIENCES AND HARDSHIPS.

Now, please begin with a brief self-introduction from both of you and an introduction of your company. First, Mr. Seko of Kyoto Fusion Engineering, please begin.

Seko : My name is Seko from Kyoto Fusioneering. I am a director and COO. After experiencing business development and investing in startups for about 10 years at a major general trading company, I had the experience of investing in deep tech startups with the venture capital (VC) firm, Coral Capital. Among them, I realized the fun of deep tech, and I felt that such technology would support the future of Japan, so I jumped into the startup side, and have reached the present.

What we are working on is an area called nuclear fusion. After 50, 500, or 1,000, or 10,000 years, what energy sources will humans need to survive? The answer we arrived at was nuclear fusion energy.

The characteristics of nuclear fusion are that greenhouse gases are not generated, fuel can be extracted from seawater in an inexhaustible quantity, there is almost no danger in principle, and no high-level radioactive waste is generated. It is called the Sun on Earth, and although it is the crystallization of human knowledge, it is also a very difficult technology. The country is also making full-scale movements to support nuclear fusion.

Not only Japan, but the United States is also announcing nuclear fusion development programs. In the United States, there is a success story in the space industry called the famous COTS (Commercial Orbital Transportation Services) program. The combination of NASA, which is a public entity, and SpaceX, a startup, has led to results that promote space development all at once. The relationship between NASA and SpaceX is close to the context of large companies and startups, and after picking up several companies, a milestone program has begun to contribute funds of about 5 billion yen at first, then 10 billion or 100 billion yen.

The United Kingdom has prepared funds of 100 billion yen or more in the same form, and is in a situation where industrialization of nuclear fusion is being promoted.

Seko : Nuclear energy uses nuclear fission energy generated when heavy atoms such as uranium and plutonium split. Since nuclear fission occurs once a reaction occurs, it occurs in a chain manner, so there is a possibility that a meltdown will occur, such as the Fukushima Daiichi Nuclear Power Plant accident.

Nuclear fusion, on the other hand, uses energy generated by colliding hydrogen (deuterium or triple hydrogen), which is a light element. Since it is very difficult for elements to collide with each other, it is said that accidents do not occur.

The ITER program, which is being carried out at a cost of approximately 3 trillion yen in southern France, is a project in which 7 countries from around the world participate. It is a huge system, and since it is a framework for international cooperation, it has been carefully progressing over a long period of time. At the same time, 40 to 50 private nuclear fusion startups have emerged in recent years, and they are taking on more risky challenges.

Among them, the United States, the United Kingdom, and Germany are leading the way, and in Japan, three companies are working on nuclear fusion, starting with Kyoto Fusioneering, Ex-Fusion, which uses lasers, and Helical Fusion. Also, recently, Professor Nakamura Shuji, who won the Nobel Prize, has launched a new Blue Laser Fusion in the US. The world of nuclear fusion is booming in this way, and approximately 600 billion yen has been invested in this area over the past 5 years.

We also announced a total funding of 10.5 billion yen in May of this year. With JIC VGI as the lead investor, we are receiving support from such large Japanese companies and investors such as INPEX, Sumitomo Mitsui Bank, MOL, Kansai Electric Power Company, JAFCO, DBJ Capital, JGC, Mitsubishi Corporation, Mitsui & Co., and Mitsubishi UFJ Bank. As a member of the company, Konishi Satoshi is the CEO, I am the COO, and Sakamoto Keishi is involved in management as CTO. Konishi and Sakamoto have been developing technology for a long time at academia and research institutes, and our company's strength is that we develop business centered around the technology of these two people.

Seko : Many startups and global public institutions are working on how to cause plasma reactions. On the other hand, it is necessary to consider the entire plant, such as how to extract this nuclear fusion as energy and how to cycle fuel. Overall, this fusion would probably be a plant of 500 billion yen to 600 billion yen per unit. We are developing important key components that are responsible for about 20% or 30% of them. This is a device called a gyrotron, and it is in the latter half of hundreds of millions of yen per unit. This device is made with the help of people in various Japanese supply chains. Starting with Canon, Kyocera, and JASTEC, the equipment is a combination of technologies from over 30 companies, and we have already received orders worth several billion yen from 4 overseas customers.

While being indebted to everyone in the Japanese supply chain, we are developing a business that delivers Japanese technology to the world. In addition, at the facility currently under construction in Kumiyama, Kyoto, we are proceeding with efforts to generate electricity by extracting heat from it to generate electricity, manufacture hydrogen, and make carbon credits as is, in a form that mimics a nuclear fusion reaction for the first time in the world. This is expected to take shape at the end of 2025.

Additionally, we have formed a partnership with the Canadian National Atomic Energy Research Institute in Chalk River, Canada, and we plan to handle slightly difficult elements there.

Currently, there is already a 500 billion yen market for nuclear fusion. In the near future, when nuclear fusion is commercialized (implemented), it will become a large market of 90 trillion yen to 150 trillion yen. We are working on it because we are the first members, jump in, open up the market, and think that by going overseas, we can revitalize the entire Japanese supply chain or create a new industry that continues with the automobile industry.

Kuwabara : Thank you very much. It was a very exciting story.

Next, Ms. Matsuoka, please introduce yourself and introduce your company.

Matsuoka : My name is Matsuoka from QunaSys Co., Ltd. As the COO of QunaSys, I am mainly in charge of business development. Originally, I got a Ph.D., in the field of materials chemistry, and then worked on innovation strategies and R&D strategies at a consulting firm for about 10 years. It was just when the keyword quantum computer began to be heard. I was personally interested, so I visited QunaSys when one or two people were still researching quantum computers at ANRI's incubation facility, which is a shareholder. The meeting table at that time was a table tennis table, and I decided to join because I thought it would be interesting. It's been about 4 years since then, and even though I'm struggling, I'm having fun every day.

QunaSys is a company founded in 2018 by a CEO who is currently attending the University of Tokyo, but most of the teachers who became technical advisors are Osaka University teachers, so I'm not saying they are from university in any way. QuaSys is a research and development startup with 50 members, half of whom are Ph.D., and about 80% are engineers.

Our corporate mission is “Maximize the Power of Quantum Computing.”

Even when it comes to quantum computer development, QunaSys does not make quantum computers themselves. Our mission is to create algorithms and software that can make the most of the power of existing quantum computers. Specifically, we are developing software and algorithms by focusing on software that runs on quantum computers, and applications in the chemical field that are said to be applied quickly among them.

Nonetheless, in the future, I think applications for solving linear equations using HHL algorithms, in the CAE domain such as fluid simulations and electromagnetic wave simulations, will increase, so we are focusing on applications that perform precise calculations of electrons called quantum chemical calculations as short-term goals while looking ahead to that, and are proceeding with the development of solutions to that.

Matsuoka : Meanwhile, we are providing a place for those interested in quantum computers to learn that quantum computers operate on such principles and can do this kind of thing. That is our own community called QPARC (Quantum Practical Application Research Community). About 50 companies have participated, and they provide educational programs and programs to play with quantum computers, etc., think together about how they can be used, and test what kind of use cases there are as next steps using our software. Also, we are doing joint research with companies that think they can use it in the future.

We provide software such as QURI and QURI Parts as tools. We are currently collaborating with many companies, and as investors, in addition to VC, starting with JIC VGI, we have also received investment from business companies such as Fujitsu, Nippon Zeon, and Mitsubishi Electric, and we are also carrying out joint research initiatives with such companies. Last year, we received investment from IBM in the US, and we are working closely together. Since it will be a lengthy development, we are also collaborating with academics and government, especially the Cabinet Office and the Ministry of Education, Culture, Sports, and Technology, and are proceeding with the initiative while receiving support.

Quantum computers have become a big topic of conversation, but the reality is that killer applications have not yet been found. There were many cases where people got involved with quantum computers because they were interesting and exciting, but after all, there is talk that it is difficult for companies to use quantum computers without an application, making use of quantum computers difficult to get through the budget. Our company also felt that issue, so we also started SDQs (Sustainable Development Goals to Which Quantum Technology Can Contribute) initiatives. This is an initiative to think about how quantum computers can contribute in the context of sustainability called SDGs. This is being done as a spin-out of QPARC, so I think it's an interesting initiative. I would appreciate it if you could consider it as well.

Kuwabara : Thank you very much, Ms. Matsuoka. This was also a very exciting story. Today's theme is open innovation, so I'd like to receive comments from both of you on a few topics.

The first question I would like to ask is what is the importance of open innovation for both companies or deep tech startups. In each explanation, they explained that they are proceeding with the business while collaborating with large companies and research institutes, but could Mr. Seko talk about that?

Seko : Open innovation is essential for deep tech, and I think it's unavoidable. Even in terms of dealing with customers, the context of TOB and TOG (Government) is larger than TOC, so I think deep tech and open innovation are compatible in order for startups to cross a deep valley and deliver to the market.

Kyoto Fusioneering's strength is that it can bring basic research, applied research, manufacturing technology, and industrial technology that Japan has cultivated over the past 30 or 40 years overseas. We can see the separation between technology that cannot be done overseas and technology that can be made in Japan, and we are constructing our business by carefully analyzing which technologies are strong in Japan and what is interesting as a market. For deep tech startups, open innovation is inseparable, and since Kyoto Fusioneering is right in the middle of it, I would like to work with everyone to develop a business that brings this Japanese technology overseas.

Kuwabara : Thank you very much. I think you've heard that open innovation is essential, and that startups are successfully utilizing the research and manufacturing supply chain that Japan has continued until now to expand their business globally.

Ms. Matsuoka, there has been talk about efforts to gather large companies at QunaSys, but what do you think is the importance of open innovation for QunaSys?

Matsuoka : In order for deep tech to be established as a business, it is necessary to firmly demonstrate industrial value and show that it fits this part of society in this way, and I think that is the role of startups.

This is something that can never be done by startups with technology alone, and I think collaboration with large companies etc. is essential. Even if quantum computers advance in the future and can be used, for example, at development sites in the manufacturing industry, I don't think it is that obvious how quantum computers will be used. In that sense, it is good to use it this way, and we have to think about how development will change if we do that. I think it's important to find such things through open innovation.

Kuwabara : Thank you very much. I was told that the role of startups is to prove the industrial value of cutting-edge technology, and that it is important to do this while cooperating with companies.

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Kuwabara : In line with the current conversation, I would like to ask Ms. Matsuoka the next question. There are various difficulties in promoting open innovation in the deep tech field; for example, I think there are aspects where it is difficult to understand the technology itself, and it is difficult to quickly lead to sales or performance. Can you talk about what kind of difficulties you felt were, and how you overcame them in the midst of that?

Matsuoka : I'm struggling every day. Since I was originally in consulting, projects of around 30 million yen have been carried out quite normally. I thought that joint research on such a scale would soon be settled even after joining QunaSys, but it wasn't that easy, and I didn't understand the reason at the time. There were many cases where it wasn't easy to launch a project, even though it was said that it was valuable, they were interested, and personally I really supported it.

I think quantum computers will probably get caught in the investment logic of research and development. I think there are various reasons for this, such as time frames and clarification of applications. I think it's important for both deep tech and startups to understand the difficulties and communicate with society.

Kuwabara : I see, thank you very much. Certainly, in the sense of time axis, it is necessary to think about it in the long term, so there are limits at the field level, and I think it was important for the other party, including the top management, to work on it while understanding the importance.

How did Mr. Seko feel the challenges and difficulties in promoting open innovation, and how did he overcome them?

Seko : In a nutshell, I think it's like a “sense of distance.” In other words, when is open innovation, and to what extent will it become open? The field of deep tech is both a mass of intellectual property and a mass of know-how, and there are places that business companies and large enterprises are targeting. While protecting what is strategically important to us, I think it is extremely important to have a “sense of distance” where large companies support us.

The reason why large companies are interested in startups like us is that they are sometimes at the cutting edge of technology, but I think it is business development through that. While working on our own technology, we let large companies take parts that are meaningful to large companies. But we must not miss the most delicious part. I think it is necessary to have an open discussion on these points. For example, I think the key is for decision makers to enter from the first meeting, and I don't think open innovation will progress without creating checkpoints such as deciding on the next action plan.

Kuwabara : Thank you very much. I was told that a sense of distance is extremely important. It may be related to what I thought I'd ask next, so I'll keep asking Mr. Seko.

Kuwabara : When large companies cooperate with startups working on open innovation, I think there are an increasing number of cases where they work through investment in startups.

What is the significance and effect of involving investment in collaboration or taking the form of capital and business alliances for startups and large enterprises?

Seko : I think there are capital alliances, business alliances, and capital and business alliances that do both as methods of cooperation with large enterprises. When it comes to capital and business alliances, I think it's very good in the sense that mutual awareness and commitment are strengthened rather than normal business alliances. The biggest problem for startups is funding, so I think business collaboration involving capital would be nice.

On the other hand, I'm also careful not to add too much color to specific companies.

Kuwabara : In the sense of showing mutual commitment, it is important to have a capital relationship, and on the other hand, it is a point to keep in mind for startups not to become too colorful with a specific company. Thank you very much.

According to Ms. Matsuoka's explanation, the name of the operating company was among the shareholders. I think there are both positive and negative aspects of involving this kind of capital relationship, but what do you think?

Matsuoka : I think there are times when you don't really understand the difference between capital alliances and business alliances. I also sometimes get confused while talking with people in large companies. There is a good example I came up with recently, and I think having a capital relationship is the same as “buying 2 million yen of Toyota stock.” No one would think that a Prius would follow just because they bought 2 million yen of Toyota stock. However, there is a high probability that the person who bought the stock will buy a Prius, and there is also a high probability that they will support Toyota.

If you participate in a capital alliance, I think you will be able to think of it as your own business. Companies with capital alliances can seriously think about QunaSys's business, and it's easier to move forward with discussions about doing something together as a company. I think it would be good for each other to collaborate in the form of capital and business alliances, especially for projects that require long-term strategic decision-making, such as deep tech.

Kuwabara : I see. Certainly, the metaphor for buying Toyota stock is as you said, and if so, I think there are places where people have the feeling that they want to listen to what they say because they have invested, but it's a slightly different story in terms of relationships. After listening to the stories of the two of them, I was able to understand that the significance of involving a capital relationship is enormous.

Kuwabara : As for the last question, I would like you to say a few words about the role that VC should play in open innovation and your expectations for the future. Mr. Seko, please.

Seko : I have experience working in VC. At that time, we were not only investing, but also providing business development support for startups and open innovation support for large companies. That's because in the early days of a startup, you can't meet people from hundreds or 1,000 companies, and you don't have those connections. In that respect, VCs have 100 to 200 startups, and they also have points of contact with large companies. Therefore, I think it is important for VC to be responsible for matching the two. If you look at it from the perspective of a large company, startups are probably mixed up. Therefore, once through VC, I think searching for startups in an area close to our technology or an area close to our own business will be a shortcut. The JIC VGI business development people also came to the venue earlier, so I'm aware that they were matched.

Kuwabara : Thank you very much. I would like to do my best to be able to match. What do you think of Ms. Matsuoka, what you expect from VCs, and if there are any actual examples.

Matsuoka : What startups expect from VCs is support for business development. In connection with that, I am most hopeful that they will introduce customers. On the other hand, in terms of the VC business type, there is an expiration date, so there are many cases where it does not fit deep tech's timeline. I think government funds should complement things that are difficult to invest in VCs, and we are receiving investment in that context, so I am very thankful for that.

Kuwabara : I heard that deep tech's time line often doesn't match investors' time lines easily, and there is room for improvement in that area in the future.

Now, I heard from the two of them that for deep tech startups, open innovation is important, and rather essential, but that differences in time axes between large companies and startups, and how close the sense of distance should be made are also important factors. Among them, we also received comments that it would be easier for a decision maker to proceed smoothly if a decision maker appeared from the large company side from the initial timing of the discussion. There was also talk about how effective it is to increase mutual commitment through capital alliances. Thank you for sharing this valuable story. Finally, I think the two of them would have a message for everyone at the venue, but what about Mr. Seko?

Seko : I'm traveling overseas to develop customers, and I often meet overseas investors, but people from overseas are paying a lot of attention to Japan right now. This is true in terms of money, and so is manufacturing and human resources, and after all, I think that the foundation is supported by large companies, academia, academic institutions, and universities. If deep tech startups don't achieve results, Japan in 10 or 20 years may be in jeopardy. The success of deep tech startups depends on the help of large companies, so please support them.

Kuwabara : What do you think of Ms. Matsuoka?

Matsuoka : We are in the process of searching for how quantum computers fit into society, so if there is a company that is even a little interested in quantum computers through today's talk, I would be grateful if they could join us in thinking together.

Kuwabara : Thank you very much.

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