Sumitomo: Why Respect is Necessary for Corporate-Startup Relationships

By Lilly Milman |  August 30, 2021

Sumitomo Chemical is one of the largest chemical companies in Japan, with business units that span petrochemicals and plastics, functional materials, crop sciences, and pharmaceuticals. And in its US branch — which has a small office in California and in Cambridge, Mass. — managers have a mission: creating next-generation products through corporate venture investing and collaborations. 

Yosuke Nakashima and Hiroyoshi Nakajima both sit in the Corporate Venturing and Innovation office, as Senior Managers. The duo are responsible for identifying relevant startup opportunities for the business. Nakashima works primarily with life sciences — which includes health and crop sciences  and pharmaceuticals, and everything in between — and Nakajima concentrates on technologies that can reduce environmental impact, as well as information and communication technologies, like materials for 5G wireless or touchscreen panel displays. 

In their roles, Nakashima and Nakajima engage startups in a number of ways, including partnerships with companies like Cultivian Sandbox Food & Agriculture Fund III and other venture capitals. They provide Sumitomo Chemical America with referral databases of startup companies, among other services. Sumitomo also participates in the Massachusetts Institute of Technology Industrial Liaison Program (MIT ILP) and the Somerville, Mass.-based cleantech incubator Greentown Labs

In a recent interview with InnoLead, Nakashima and Nakajima broke down the steps they take when approaching startups, successes they’ve had with smaller companies, and more. This interview with Nakashima and Nakajima is a part of InnoLead’s forthcoming research report, “The Changing Landscape of Corporate-Startup Engagement,” sponsored by MIT Corporate Relations.

How We Engage With Startups

Yosuke Nakashima, Senior Manager, Sumitomo Chemical America

Yosuke Nakashima: We have multiple ways to engage with startups… What we prefer is to first…conduct proof- of-concept research with startup companies, or sometimes academia to validate the technology. … After evaluating their technologies, we like to consider comprehensive collaborations, more long-term collaborations…or we consider making an investment to the startup companies. 

This is the typical way for us, but, always, it depends on the situation. If startup companies are clearly looking for the investment, we try to consider that as well.

Each startup has very unique [technologies] which Sumitomo Chemical does not have. That’s why we work with them. — Hiroyoshi Nakajima

One Example of a Successful Engagement

Yosuke Nakashima: Conagen is located in Boston. They are a synthetic biology company, making…high-value chemicals by using engineered microorganisms. … More than three years ago, we started working with Congagen to develop one specific chemical by leveraging their technologies. We started a research project with them. After building a trusting relationship with them through the project, Sumitomo Chemical Japan decided to make an investment in Conagen. Sumitomo Chemical invested $30 million in Conagen last year. … The Corporate Venturing and Innovation Office we belong to was the first contact with them, then we started a project with them, and then after that Sumitomo Chemical made an investment in them. 

Challenges That Corporates Typically Face

Yosuke Nakashima: The first challenge is…[getting] enough endorsement from people in the business unit… From a long-term perspective, we are looking for platform technology, which could be used across several other business sectors, or we are looking for new products or businesses, which could add value to the existing businesses or perhaps…create a new business unit. 

People in the business unit and also the research scientists in our organization tend to be skeptical of new technologies. — Yosuke Nakashima

Sometimes there is research cannibalization or business cannibalization. For example, as a corporate department, we are looking at competitive technology as well, against our existing businesses. So in such cases, people in the business unit and also the research scientists in our organization tend to be skeptical of new technologies. So, that’s why when we introduce new technologies and opportunities, they tend to be negative. That’s one of the challenges, but we need their support to evaluate their technology and work together, that is our goal. A key solution will always be communication [and building] a relationship [between senior leaders based in Japan and startups]. … We do a patent search, and technology evaluation to have more confidence.

Hiroyoshi Nakajima, Senior Manager, Sumitomo Chemical America

Hiroyoshi Nakajima: Since I have been working in a business unit for a long time, I understand how the business people think about a new business development. Always, we would like to have some solid or concrete projection or hypothesis, even before that initial project. Since new business developments have no data or results and startup projects move fast, there’s always a mismatch between when the Sumitomo Chemical business unit is ready to proceed and when startups — and actually our organization [mine and Nakashima’s] — are ready to proceed. 

Communication and transparency [are] quite important. To share the ultimate goal is quite important when we work with startups. … If I compare [big corporations] with startups, startups need to have clear short-term and long-term goals and commitment from corporations. … We need to have [business discussions]…with startups. We have to…think about how we would like to work with your startup to grow, or to create a new business together. … I was told that some Japanese companies tend to think about a startup as a supplier or vendor, but…you have to become a partner. Each startup has very unique [technologies] which Sumitomo Chemical does not have. That’s why we work with them. So therefore, we have to respect them.