Announcement of Capital and Business Alliance with Bitkey Inc. and Debt Financing

SHIFT Inc. (“SHIFT,” headquartered in Minato-ku, Tokyo, Japan; Masaru Tange, CEO and Representative Director) announced today that it has formed a capital and business alliance with Bitkey Inc. (“Bitkey,” headquartered in Chuo-ku, Tokyo, Japan; Yuki Ejiri, Masaki Fukuzawa, Masanori Hotsuki, Representative Directors), entering into a share subscription agreement to purchase convertible preferred shares through a third party allotment and acquire an equity interest in Bitkey.

Reason for the capital and business alliance
As SHIFT has been expanding its software quality assurance business since 2009, it has served clients in a wide variety of industries, such as financial, retail, logistics, and entertainment. Moreover, toward achieving its growth strategy, “SHIFT 1000,” which aims at ¥100 billion of net sales, SHIFT has been strategically acquiring businesses to expand and enrich its service portfolio. SHIFT has also shifted its corporate branding from “SHIFT as a software testing company” to “SHIFT as a sellable services producer” to realize ¥100 billion of net sales. As this new catchphrase indicates, SHIFT will commit to bringing growth to the businesses of its customers.

In recent years, SHIFT has been advocating its new concept of “DAAE” aiming to rebrand itself as a sellable services producer.” “DAAE” emphasizes “Design,” “Agility,” “Assembly,” and “Economic Quality” and is a new acronym. SHIFT foresees that in the future, the Japanese technology industry will face more challenging and sophisticated demands from users, more competitive market environments and more requirements to shorten development cycle time. Under these circumstances, it will be crucial to develop services centered on DAAE, replacing the concept of “QCD*1,” which is widely insisted to be essential in Japan’s conventional manufacturing industry.

(1) About Bitkey
Bitkey is a start-up company which sets its mission as to “connect everything safely, conveniently, and comfortably with the power of technology” and develops “connect business*2.” Since its foundation in 2018, Bitkey has developed various products and services including smart-locks and digital keys, in wide ranging areas such as housing and offices. This has led it to grow dramatically as a game changer in this DX market.

(2) Purpose and overview of capital alliance
In the housing and offices area, where Bitkey provides its products, it has an extremely high product/service recurring rate due to its business nature that its solution combines hardware and software. In order for Bitkey to continue to grow stably in the future while maintaining a high product/service recurring rate, it is important to secure the sound and speedy software development capability to respond quickly and flexibly to customer requests, and the efficient development resources to realize this.
Against this backdrop, SHIFT made an investment as a lead investor in Bitkey’s fundraising of this time. SHIFT provides capital and human resources so that Bitkey would be able to maintain its extraordinary business speed. Bitkey puts good evaluation on SHIFT for its strong “manufacturing capabilities (service-development capabilities).” Therefore, SHIFT expects that Bitkey will actively utilize SHIFT’s “manufacturing capabilities (service development capabilities)” in order to efficiently secure development resources for responding quickly and flexibly to customer requests. With this, SHIFT will support the further business growth of Bitkey and, in turn, the enhancement of its corporate value.

(3) Purpose and overview of the business alliance
SHIFT will provide “DAAE” services. Through its DAAE services, SHIFT will contribute to the establishment of a sound service development system that is able to respond to rapid growth, by providing excellent human resources, the source of SHIFT’s high growth, and knowledge on the “producing sellable services” that it has cultivated in the process of growth. SHIFT is passionate to support Bitkey in a way that to none would be able to provide but SHIFT: building the development system while ensuring the product/ service quality. This would contribute to the sophistication of the value that Bitkey provides to its customers.
Also, SHIFT will work with Bitkey which is expected to grow significantly in the future, because this alliance would bring much data, knowledge and experiences, and thereby, new customers in the future. It would be, moreover, helpful in strengthening relationships and expanding transactions with existing customers. SHIFT expects that this track record of providing DAAE to Bitkey contributes to the promotion of DX for a wide range of customers in the future.

Since its launch in September 2019, when SHIFT started to deliver the services centered on “DAAE,” SHIFT has accumulated wide-ranging knowledge while expanding its service. SHIFT will further make successful cases as “SHIFT as a sellable services producer,” including this alliance.
In order to gain customer recognition of its service development ability through DAAE, it would be most effective to create and show specific successful cases or the ones that could grow into overwhelmingly successful services such as platform. SHIFT believes that this track record of supporting the development of services that may become platform will be accumulated as SHIFT’s asset and function as a strength to grow the business and increase the corporate value in the future.

A portion of the investment associated with this alliance utilizes a part of the credit line established with “Positive Impact Finance (PIF).” By providing comprehensive support for Bitkey, SHIFT believes that it can encourage to allocate human resources to areas which has the real need, to balance the gap between the supply and demand of Japanese IT human resources, and in turn contribute to solving the important issues facing Japanese society, such as the shortage of IT human resources and the improvement of labor productivity.
In PIF, the lender, Sumitomo Mitsui Banking Corporation (“SMBC,” headquartered in Chiyoda-ku, Tokyo, Japan; Makoto Takashima, President and CEO) praised SHIFT’s focus on ESG initiatives towards social issues including the lack of IT human resources and Japanese IT industry reform. This alliance is also aligned with its ESG initiatives.

SHIFT’s service development ability with “DAAE” would help to improve Japanese labor productivity and to build better social infrastructures. Therefore, SHIFT would actively support companies and services that proactively resolve social issues as it does with this alliance.

Through this alliance, SHIFT will work further to grow. SHIFT also hopes that by working with Bitkey, which aims to “connect everything safely, conveniently, and comfortably with the power of technology,” it can help promote the digital utilization in Japanese society.

*1: QCD is a term that consists of three concepts: Quality, Cost, and Delivery. It has been widely advocated to be crucial for “ever-improving manufacturing” in Japan whose manufacturing industry has been globally competitive.

*2: In its “connect business,” Bitkey aims at building infrastructure that organically connects people, goods, service, space, individuals and organizations, in our daily life, offices and travel destinations.

For further information, please kindly refer to the document below.
20210927_Bitkey_fin_EN