FROM ENTREPRENEURS

12 STORY ELEMENTS UTEC

A world where you can utilize your personal information for your own advantage

Representative, ELEMENTS, Inc. Partner/Managing Director, COO

PROLOGUE

ELEMENTS offers personal authentication and optimization solutions through its AI cloud platform, a system designed to analyze human data. The platform provides versatile solutions for various situations, such as adjusting office room temperature based on a person's movements. In fact, investing in ELEMENTS was the first project Sakamoto undertook after joining UTEC. Initially, Sakamoto felt that there was no indication from the ELEMENTS side to accept UTEC's investment offer. So, how did the relationship evolve from that point to the eventual listing in 2022? We invited them to reflect on the journey.

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SECTION01 : There is no definitive answer when it comes to human information.

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SECTION01

There is no definitive answer when it comes to human information.

ELEMENTS offers companies solutions for analyzing a wide range of human information, including biometric data. What sets ELEMENTS' technology apart from the numerous AI startups emerging in the field?

Sakamoto:
Today, ELEMENTS' personal authentication solutions have become an integral part of various aspects of our daily lives. For instance, when I recently opened a bank account, ELEMENTS' service was used to verify my identity. What are the distinctive characteristics of ELEMENTS' technology?
Kuda:
The core technology behind ELEMENTS is machine learning. For instance, if you want to identify a defective screw using image recognition, you can compare it with the data of a correct screw. However, there is no definitive answer for human faces. To recognize my face, you would use machine learning to find a probabilistically similar face from a vast amount of data. We have developed technology that accelerates the machine learning process by organizing data hierarchically when the AI system processes large volumes of data. We employ this technology to analyze human faces, body shapes, and behaviors in areas where there are no definitive answers and provide a diverse range of solutions.
Sakamoto:
The company was founded in 2013. Since then, several AI startups have emerged. How has the company’s competitive advantages evolved over time?
Kuda:
Initially, after our founding, the learning methods I just mentioned served as our distinguishing factor. However, our current strength also lies in the vast amount of data we possess. In areas where the correct answer is yet to be determined, the volume of data dictates the accuracy of recognition. Having been in business for 10 years, we likely hold the largest collection of human data in the world. This is not merely due to our early establishment. While typical AI startups provide only the algorithm to businesses, with user data remaining the property of those businesses, we have insisted on acquiring data from them. Instead of Company A analyzing only its own user data, we analyze data received from Company A, Company B, Company C, and so on, in a cross-business manner. This approach enables us to deliver a more accurate analysis platform to our clients.

SECTION02 : “UTEC had a distinct ideology compared to other VCs."

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SECTION02

“UTEC had a distinct ideology compared to other VCs."

After working at a securities company, Kuda founded Liquid (now ELEMENTS) in 2013. He met Sakamoto of UTEC while advancing the research and development at the company.

Kuda:
The inspiration for starting this business came from the anime "Ghost in the Shell." The story is set in the near future, where human bodies are artificial, and memories exist as external devices. In a world where everything is digitalized, I pondered over the concept of individuality. This became a major theme for me. In order to explore the theme of what it means to be an individual, it was first necessary to identify and authenticate the individual. That is why I founded a biometric authentication company utilizing machine learning.
Sakamoto:
I first learned about ELEMENTS in 2014 when Mr. Kuda applied to the "ICT Innovation Creation Challenge Program" organized by the Ministry of Internal Affairs and Communications (MIC). UTEC was one of the commercialization support organizations for this program. Having just joined UTEC with ample time on my hands, I carefully read through the documents and noticed a venture working on "1-to-N" biometric authentication (see note). Intrigued, I contacted them immediately, as I believed "1-to-N" represented the true essence of authentication. That startup was ELEMENTS.
Note... Authentication methods can be categorized as "one-to-one," where the input biometric information is matched with the ID on a card or another device, and "one-to-N," where the input biometric information is uniquely identified by sequentially comparing it with N pieces of biometric information stored in a database.
Kuda:
You called me and visited me that very day. In fact, I had been approached by numerous venture capitalists, but it was Mr. Sakamoto who seemed most interested in discussing the technology. As I recall, we had a great time talking about "Ghost in the Shell" (laughs).
Sakamoto:
We at UTEC approached them and expressed an interest to invest in the company. Initially, there was no indication from their end that they would accept our offer.
Kuda:
We were cautious about external capital. Accepting an investment from a VC with a differing perspective could potentially result in issues later on. Ultimately, we decided to accept an equity investment from UTEC due to Mr. Sakamoto's personality and the proposed timeline for the IPO. We had no immediate plans to go public, and when we examined UTEC's portfolio, we noticed that they demonstrated patience in some cases and clearly held a distinct philosophy compared to other VC firms. We felt confident that we could collaborate effectively and decided to allow the investment in our company.

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PROBLEM

Mr. Kuda, a serial entrepreneur, possesses an extensive network within the startup engineering community. However, to maintain and expand the business, expertise and human resources in other areas are also essential. The challenge lay in addressing these gaps.

SECTION03 : The bottleneck for overseas expansion was "Human Resources”

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SECTION03

The bottleneck for overseas expansion was "Human Resources”

ELEMENTS received an investment from UTEC in 2015. What were the value-add activities undertaken by UTEC that supported the company to become a market leader in online identity verification?

Sakamoto:
What are some of the things that impressed you the most about UTEC's value-added offerings?
Kuda:
The first aspect that comes to mind is the support for grant applications. During this period, generating sales may not be possible, so it is necessary to sustain the business through subsidies and other mechanisms. However, I lacked expertise in grant applications. Although all government grant programs are publicly available, it was extremely challenging to find one that suited our business.
Mr. Sakamoto provided invaluable support. With his background in the Ministry of Economy, Trade and Industry (METI), he possesses extensive knowledge about grants. He not only introduced us to programs suitable for ELEMENTS but also assisted us with the application process. Thanks to his help, I believe that our submitted applications have been selected at a remarkably high rate.
Furthermore, biometrics is a sensitive area, and its societal implementation must coincide with legal reform. UTEC offered advice on engaging with the government and made introductions to relevant individuals, which proved to be very helpful.
In terms of connecting with people, UTEC also made significant contributions by introducing valuable human resources. Mr. Hiroki Hasegawa, the current CEO of Liquid (the business entity responsible for ELEMENTS' personal authentication area), previously served on the management team of a listed company and was introduced to us by UTEC. We connected with Mr. Hasegawa because we initially aimed to promote the use of this technology on a global scale. Biometric authentication requires negotiations with foreign governments, and I believed it would be more effective if the CTO and I relocated and worked on the project ourselves. However, at that time, we didn't have management personnel within the company whom we could confidently entrust Liquid to. That's when we were introduced to Mr. Hasegawa, which enabled us to expand our business in Indonesia. In addition to Mr. Hasegawa, UTEC introduced us to a diverse range of individuals, including those from major consulting firms. As I didn't have a network in that area, UTEC effectively filled the gap.

FINAL SECTION : Towards a world where individuals can freely control their own information.

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FINAL SECTION

FINAL SECTION

Towards a world where individuals can freely control
their own information.

In December 2022, ELEMENTS went public. With its origins in the profound theme of "what defines an individual," what does the future hold for this business? We inquired about their upcoming prospects.

Sakamoto:
How has been the progress of your overseas expansion since your relocation?
Kuda:
After launching authentication businesses in Indonesia, the Philippines, and Malaysia, I returned to Japan. Identity verification, which prevents identity theft, can be a disconcerting technology for those with something to hide. Nevertheless, we will not alter our policy of considering Asia our most crucial market. As our business deals with human data, we see potential in countries experiencing population growth and the emergence of new values. We plan to expand our business in Japan while continuing to explore global market opportunities, with a particular focus on Southeast Asia.
Sakamoto:
You are also working on full-scale solutions beyond authentication. Can you tell us about your vision for the future?
Kuda:
In the quest to understand what defines an individual, I believe we must first transition from the current world, where a few major platforms monopolize information, to a world where individuals can freely utilize their own information. Once such a world is established, people will be able to use their unique information to enhance their daily lives. For instance, they can employ data about their body shape to purchase suitable clothing, or use it as a healthcare reference, recognizing areas of concern and determining, "I need to exercise a bit because I'm worried about this specific area."
Sakamoto:
Mr. Kuda looks 10 to 20 years into the future, and sometimes people around him are taken aback because they don't understand what he's pursuing (laughs). For instance, consider your own career, right? You've always had a passion for mathematics, yet you holds a Bachelor of Laws degree and worked for a securities company. At first glance, it may seem inconsistent, but when reflecting on the business you're currently involved in, you've managed to come this far by effectively gathering the pieces of technology, legal reform, and finances from a very long-term perspective. The themes you've just discussed also have an extended time horizon and might be beyond the comprehension of an ordinary person like myself. However, I am confident that Mr. Kuda has a solid blueprint in his mind. I eagerly anticipate witnessing how he will realize the vision that ELEMENTS aims to achieve in the future.

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