SAN FRANCISCO -- SAP, one of the world's biggest enterprise software companies, is about to launch its first startup accelerator in Asia and has picked Japan for its first foothold in the region.
While many large corporations see rising startups as threats, SAP is developing a unique model that works for customers, the startups and itself.
Ram Jambunathan, managing director at SAP.iO, the Germany-based technology company's business unit focused on incubating innovation, recently talked to the Nikkei Asian Review about what startups they seek in Japan and SAP's ambitious game plan in Asia.
Jambunathan leads both the SAP.iO Fund and SAP.iO Foundries. The former, like most venture capital funds, invests directly in startups in exchange for equity. But his secret weapon is the latter: an accelerator program that connects business software startups with SAP's clients.
"What we offer in foundry programs is not money, but guidance, support and most importantly, direct accesses to our clients, which can be more valuable for some startups," Jambunathan said.
He views it as a win-win-win scenario. SAP's clients want cutting edge solutions to their business problems, and startups offer high-quality solutions for a low price. What is the gain for SAP? Nothing financially at first, but it is a way to learn about clients' problems firsthand and spend quality time with them, so it helps improve customer retention as well.
"Our job is to connect them, so our clients are happy, startups are happy, and so are we," Jambunathan said.
"Our goal is getting clients coming to us whenever they have a problem that needed to be solved," he said.
Jambunathan cited SAP's more than 420,000 corporate clients around the world, including 91% of Forbes magazine's Global 2000 companies. And 77% of the world's financial transactions will touch an SAP system. Access to corporate clients at this scale is hard to resist, especially for enterprise software startups struggling to land their first few big-name customers.
Gnowbe, for example, is a graduate of the past foundry program in San Francisco this January. The roughly 3-year-old company provides bite-size corporate training via mobile phone.
"In order to be enterprise-ready as a startup, it is a very different game if I'm just trying to sell my apps versus if I now partner up with world top human management system like SAP's SuccessFactors," said So-Young Kang, founder and CEO of Gnowbe.
"We joined the foundry program not for funding, but for access to clients, also for partner and integrate with SAP ecosystems," Kang said.
Gnowbe was invited to make a presentation in April at SAP's Asian Innovator Summit, where SAP clients from around the world attended. The company has received 17 demo requests since the presentation. "Just one event, and 17 demos, it's pretty overwhelming," Kang said.
Founded in San Francisco, Gnowbe tested and developed its product in Singapore and now has more than 100 clients worldwide, mostly in Asia and Europe. The company will announce its official launch in the U.S. market later this year.
Gnowbe raised a $2 million seed round in 2017 and will start raising series A funding this summer after signing an official partnership contract with SAP, Kang said.
What differentiates SAP.iO's foundries from most startup accelerators are not only its "zero equity" feature, but also how the program does not actually compete with other incubators or venture investors.
In Japan, for example, SAP does not see itself as a competitor to SoftBank Group's Vision Fund. "We are playing at a much earlier stage than SoftBank," Jambunathan said. "Our goal is helping those startups to get the first 15 to 20 customers, gain tractions and help them prepared for hopefully the giant funding round from Softbank."
The Japan accelerator will start in July. The application process for the Japanese program has closed, and there are more than 50 applications, from which SAP will select six to eight startups for the program.
"Japan has historically been a leader in automotive, robotics, biotech, and technologies that serve the aging society," Jambunathan said. Startups addressing these big markets will be a focus for the first SAP foundry in Japan, but "we are looking for any startups that we think are solving problems that are interesting or will be interesting to our customers," he said.
Singapore will be the second Asian location for the accelerator program, as it is the gateway to the Southeast Asian market. But China and India are SAP's biggest ambitions for where to go next.
Jambunathan called Japan and Southeast Asia two markets SAP already understands. The company wants to establish itself in these markets, then look into moving more meaningfully into China and India.
"Both India and China are somewhat fragmented markets," Jambunathan said. "Like Shanghai, Beijing [and] Shenzhen, they have different dynamics in different areas. We want to truly understand the markets before making a move." SAP.iO's first stop in China will probably be one of these three big cities, he said.
For India, Bangalore will probably the natural starting point for SAP because it already has a presence there with a startup studio run by SAP Labs, but it also makes it less urgent for SAP to launch in India.
"China and India are where the growth is happening," and "we need to learn to crawl before we can walk before we can run," Jambunathan said.