(Bloomberg) — Two of Japan’s most promising tech firms together secured more than ¥35 billion ($230 million) of financing this week, underscoring growing investor interest in the country’s burgeoning AI scene.
Japanese self-driving tech startup Turing Inc. said Monday it raised about ¥15.3 billion from investors including Toyota Motor Corp. supplier Denso Corp. Separately, Sakana AI said it raised ¥20 billion at a valuation of about $2.6 billion. Sakana, which works closely with the financial industry, got new capital from existing backer Mitsubishi UFJ Financial Group Inc. as well as new investors Factorial Funds, Macquarie Capital and Santander venture capital fund Mouro Capital.
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Tokyo-based Turing’s valuation nearly quadrupled from a year ago after the Series A funding round, which valued it at about $388 million, people familiar with the matter said, asking not to be identified as the details are private. The round included a ¥5.5 billion syndicated loan, the company said.
Turing was co-founded by Issei Yamamoto, one of Japan’s best-known AI developers, who rose to fame after his algorithm defeated the top-ranked player of Japanese chess in 2017. The startup, set up in 2021, aims to build a fully self-driving automotive system and now employs about 85 people, mostly engineers.
“It’s the technology that’s difficult to perfect, not the business model,” Yamamoto said in an interview. “The message from companies like Denso is that once the technology is there, they’d be eager to support mass production.”
The back-to-back startup funding rounds highlight insatiable demand for AI even as worries over high valuations grow. The deals also coincide with an effort by the Tokyo Stock Exchange and Japanese lawmakers to discourage premature public debuts. Regulators are seeking to delist companies that fail to reach a market value of at least ¥10 billion within five years of going public, starting 2030 — a move that is spurring a record number of startup acquisitions.
“We are seeing a record amount of capital pouring into AI compute at a rate which may not be sustainable,” Sakana AI co-founder David Ha wrote in a blog post. Still, “for Japan, with a declining workforce and an aging population, the benefits of AI technology are clear.”
Turing is in talks with multiple companies in the auto supply chain including Denso about partnering up to manufacture self-driving vehicles, according to Yamamoto. While Turing’s AI model can be adapted to any type of vehicle, it will most likely be first used in high-end cars, he said.
Like Tesla Inc. and UK-based Wayve Technologies Ltd. , Turing seek to achieve full automation by training a neural network, rather than relying on rule-based algorithms, which have limited capability when handling complex tasks and unusual scenarios. But autonomous driving technology has proved challenging, littered by accidents and exits.
Yamamoto is relying on more than 50 top AI engineers to get Turing’s technology over the line, while working with Nvidia Corp. on what is now referred to as end-to-end autonomous driving. He is also betting that the company’s AI model — if successful — could help it leapfrog global rivals and attract strong demand from automakers hungry for better self-driving systems.
The startup — whose office sports a banner that reads, “We Overtake Tesla” — aims to introduce a fully autonomous system through passenger vehicles in 2029. While the goal is to have more than 10,000 vehicles powered by Turing’s AI model by 2030, the exact number would depend on negotiations with the automakers that take on the manufacturing.
At home, Toyota is exploring a collaboration with Alphabet Inc.’s Waymo on autonomous-driving tech, while Honda Motor Co. has teamed up with Helm.ai Inc. to develop self-driving capabilities.
“We’re one of the very few in Japan working on physical AI,” Yamamoto said. “And we have cutting-edge technology in this field — we’re going to win that competition, globally.”
(Updates with details of Sakana AI announcement.)
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