Generative AI Startup – Sparticle Raises Approximately 500 Million Yen (3.5 million USD) in Pre-Series A Funding, Enhances Japanese LLM Development

Japan’s artificial intelligence (AI) startup, Sparticle, has recently secured around 500 million yen (3.5 million USD) in funding from US investment funds and other sources. The company’s primary focus is providing generative AI solutions for Japanese businesses, and the raised capital will be allocated to strengthening the development of large-scale Japanese language models (LLM). Tatsuya Kaneda, the founder and CEO, with a background in technology as a former Microsoft engineer and executive at China’s leading smartphone company, Xiaomi, is leading this effort to accelerate the Japanese AI market.

The funding round, led by the Silicon Valley-based venture capital (VC) firm Wisemont Capital, along with three other investment companies, raised approximately 500 million yen in pre-Series A funding. Wisemont Capital expressed their admiration for Sparticle, stating, “Sparticle has achieved remarkable results in the AI industry with its innovative approach and a strong team.”

Tatsuya Kaneda founded Sparticle in August 2019 and expanded its operations starting from June 2020. During a time when the global pandemic was widespread, Sparticle entered the market by offering Software as a Service (SaaS) solutions utilizing AI technology, including online meetings with features like minutes of meetings and real-time translation. Currently, they have around 200,000 registered members for services such as the all-in-one collaboration tool “Felo”, the remote work virtual space “CircleO”, and “Glarity”, which summarizes results from YouTube videos and Google searches. Additionally, they introduced the world’s first translation app with real-time rewrite and translate (RRT) capabilities, “Felo Translator”.

In November 2022, following the release of OpenAI’s interactive generative AI, ChatGPT, Sparticle quickly recognized its potential and expanded its business into generative AI. Since June of this year, they have put GPT technology to use, enabling the creation of custom AI agents that learn from corporate and individual information, offering services like “GPTBase”. They have already acquired around 20 clients. For instance, the nonprofit organization Kesshin-kai, which promotes the health of the insurance industry, is using Sparticle’s technology to operate a knowledge-based system known as “Kesshin Bot”.

Sparticle is highly regarded for its technical prowess. Amazon Web Services (AWS) Japan, a major cloud services provider, announced in July of this year a program to support LLM development in Japan, selecting Sparticle as one of the 17 supported companies and organizations. Furthermore, Sparticle has strong connections with Matsumoto Laboratory, led by Professor Yutaka Matsumoto, a leading figure in Japanese AI research.

“In the global IT industry, generative AI represents a revolutionary transformation that has emerged about a decade after mobile internet. It has the potential to fundamentally change people’s lives,” says Tatsuya Kaneda, explaining the reason for the business expansion into generative AI.

Tatsuya Kaneda studied electrical and electronic engineering at Tsinghua University and obtained a master’s degree in neural network mechanisms, mimicking the functioning of the brain, at the Chinese Academy of Sciences. After working at Microsoft for five years, contributing to the development of the Windows Mobile operating system for mobile phones, he joined Xiaomi in 2010 as an early member of the team. Xiaomi rapidly grew with its affordable smartphones and became a symbol of the spread of mobile internet in China.

During his time at Xiaomi, Kaneda worked on the development and operation of social networking site MiTalk and smartphone apps. He played a significant role in supporting Xiaomi’s success on the software front. After serving as the head of Xiaomi’s self-provided mobile carrier service, “Xiaomi Mobile”, he decided to leave and start a business in Japan.

In the field of AI, China is often seen as ahead of Japan. However, Kaneda points out that “Japan’s ‘spirit of craftsmanship’ is valuable in AI development”. He believes that the development approach akin to manufacturing, emphasizing quality and steady progress, is essential in the realm of generative AI.

Japan is increasingly viewed as a more attractive AI market compared to the highly competitive landscape in China. “Japan has many customers with strong credit and payment capabilities, allowing for steady business expansion,” Kaneda says. Although decision-making may be slower in Japanese society, it is mature, fair, and efficient, and Sparticle is committed to nurturing its growth there.

Sparticle’s operations are planned to be carried out through a global team of approximately 60 members in Japan, the United States, and China. However, their immediate focus is on strengthening their presence in the Japanese market and providing AI services. They have also bolstered their management structure by appointing Shuiki Fujii, a professional with a wealth of experience in the insurance and consulting industries and the founder of a DX consulting firm with about 100 employees, who shares the company’s vision of applying DX, particularly generative AI, to society.

Sparticle CEO Tatsuya Kaneda (third from left), executive director Hideki Fujii (second from left) and core members

On the technical front, Sparticle plans to expedite the practical use of AI services that can be naturally utilized in Japanese, building upon platforms like “Llama2” introduced by Meta in July of this year. They aim to release new services addressing the shortcomings of generative AI, such as the creation of false information, also known as “hallucinations”, by the end of this year. By the end of June 2024, they aim to increase their revenue to several hundred million yen and acquire over 40 new clients, including major corporations.

Lately, there has been a growing trend of successful DX-related services in Japan, with a particular focus on generative AI. Many of these service providers have leaders and headquarters based in their home countries. In contrast, Tatsuya Kaneda and Sparticle are establishing their base in Japan, taking a significant step forward in realizing their vision.