This $2 Billion AI Startup Aims to Teach Factory Robots to Think

Published in
5 min readMay 17, 2018

Photographer: Tomohiro Ohsumi/Bloomberg.

By Pavel Alpeyev

Japan’s Preferred Networks Inc. has only one publicly available product, a whimsical application that uses artificial intelligence to automate the coloring of manga cartoons.

Yet the four-year-old firm has become Japan’s most valuable startup, with a venture capital funding that priced it at more than $2 billion, according to people familiar with the matter. Toyota Motor Corp., its biggest backer, handed over $110 million on a bet its algorithms will help them compete with Google in driverless cars. Last February, Prime Minister Shinzo Abe posed for pictures with the firm’s two young founders at his office, where they were awarded a prize for promising new ventures.

What sets Preferred Networks apart from the hundreds of other AI startups is its ties to Japan’s manufacturing might. Deep learning algorithms depend on data and the startup is plugging into some of the rarest anywhere. Its deals with Toyota and Fanuc Corp., the world’s biggest maker of industrial robots, give it access to the world’s top factories. While Google used its search engine to become an AI superpower, and Facebook Inc. mined its social network, Preferred Networks has an opportunity to analyze and potentially improve how just about everything is made.

“There is so much promise for deep learning in manufacturing,” said Yutaka Matsuo, a computer scientist at the University of Tokyo and president of Japan Deep Learning Association.

Founders Daisuke Okanohara and Toru Nishikawa met at the University of Tokyo, where they studied computer science in the early 2000s. Okanohara, an engineer whose work on something called context-aware text classification won him a “supercreator’ prize from the trade ministry in 2004, directs the firm’s research.

Nishikawa is the company’s president and pitchman. A cherubic 35-year-old, he says his fascination with computers started in elementary school. By 8th grade, he was lugging a primitive laptop the size of a car battery with him wherever he went. He told his teachers it was for note-taking, but he was actually writing programs.

Nishikawa spoke at his Tokyo headquarters, a drab collection of meeting rooms in an old office building more fitting…