This $2b AI start-up aims to teach factory robots to think

What sets Preferred Networks apart is its ties to Japan’s manufacturing might

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

Yet the four-year-old firm has become Japan’s most valuable start-up, with a venture capital funding that priced it at more than $2 billion (Dh7.34 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 start-ups is its ties to Japan’s manufacturing might. Deep learning algorithms depend on data and the start-up 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 analyse 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 of a downon-its-luck insurance company. A handful of industrial robots, used for experiments, share the space with 140 or so engineers. The firm also has one of Japan’s most powerful supercomputers, though its exact location is secret.

“People are always coming up with beautiful new office plans for us,” Nishikawa said with a laugh. “But if I’m going to spend the money, I’d rather buy more computing clusters.”

In separate interviews, the founders talked about everything from their childhoods to their AI ambitions. One thing they wouldn’t discuss in detail was work for partners such as Toyota or Fanuc, for whom they’ve become like an outsourced AI research arm.

The idea of founding a business came while Nishikawa and Okanohara were working part-time at a biotech start-up, writing software for genome sequencing.