Mitsui: Collecting E-firms, Not Art

Back to Contents of Issue: April 2000

Forget Van Goghs, Collect Internet Companies!

by Hugh Ashton

Mitsui USA's Andrew Van Etten -- an e-connoisseur
In the 1980s, Japanese corporations rode a bubble of hot air around the globe in search of art masterpieces with which to adorn their vaults. It was the era of Michael Crichton's Rising Sun, when the Japanese seemed to rule the world. Some of those same powerhouses are still collecting, but the target is no longer artwork -- it's e-companies. One of the connoisseurs in this field is Mitsui USA's Andrew Van Etten, senior director of the Strategic Business Development arm of the Electronics and Information Business.

The mission for Van Etten is to provide Mitsui with profitable partners in the Internet field, where the company's expertise can be leveraged to bring technologies to Japan. One of Mitsui's strength is its ability to bring a variety of heavy guns to bear. It can use Nihon Unisys, in which it plays a leading part, for systems integration, or the "Moshi Moshi Hotline" call center for telemarketing.

Van Etten says his group, as opposed to Mitsui's more traditional VC unit (the Private Equity Group) makes overseas investments only when there's potential above and beyond the equity value of a normal VC investment. Once his crew has made a pick, Mitsui sends out its own Japanese managers, who have typically been rotated through businesses in Silicon Valley or New York.

Mitsui, founded in 1876, calls itself a sogo shosha, or general trading company. This aptly describes its vast range of activities -- everything from banking to insurance to trading in wood pulp. In FY 1999, the import and export trading figures for the Mitsui group came to about ¥2,000 billion -- roughly equivalent to the same 1995 figures for Argentina.

One of Mitsui's most visible Internet partnerships is AOL-Japan, which has enjoyed considerable success since launching in 1997. Formed by an alliance among AOL, Mitsui, and Nihon Keizai Shimbun, the venture was one of Mitsui's first Net efforts.

Despite that venture's success, the Mitsui head office maintains tight control over every investment decision. That, of course, is the downside to Van Etten's job: most ideas must be bounced back to Tokyo for consideration by a large, consensus-driven entity that might not immediately understand the precise benefits to be gained from a particular Internet startup.

Since AOL-Japan, Mitsui has made a variety of Internet investments, ranging from eCredit .com to e-steel. It's also participated in the development of an online equities exchange, working with DLJdirect and SFG Monex.

Of course, Mitsui isn't the only big company pursuing Internet startups. Toyota also has a venture fund for promising tech startups. (Lattice Technology was a recent investment.) The Japan unit of Sun Microsystems also invests in domestic Net startups, drawing on the $200 million Sun Venture Fund of its parent company. It plans to invest in 20 Japanese ventures by year's end. IBM Japan has joined the action too, not by providing seed money but by offering assistance: the first beneficiary, a small outfit called Info Shower that specializes in electronically managing documents online, received ¥300 million in Big Blue support and services (see Venture Watch ). Fujitsu also has an investment fund, one that specializes in Asian Web firms. And then there's Softbank, which seems to act more like a large fund than a corporation.

Any company with a budget the size of Mitsui's or Sun's will hit paydirt in at least one of its investments. Whether that compensates for losses incurred in a large number of investments is a matter for the market to tell -- just as a Van Gogh of uncertain provenance shows its worth only when put up on the block.

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