A Nintendo Co. Switch game console. (Photographer: Kholood Eid/Bloomberg)

Nintendo Teams Up With VC Fund to Find New Tech for Switch

(Bloomberg) -- Nintendo Co. is teaming up with San Francisco-based Scrum Ventures to scout startups working on new ways to play or use the Japanese company’s hit gaming console, the Switch.

The program, run by Scrum, will look for startups, teams within larger companies or university researchers developing new tools to improve the Nintendo Switch platform, including components, sensors, chips or other add-ons, the venture capital firm said. Scrum and Nintendo will provide outside developers with assistance to bring products to the market. Neither company plans to invest directly in the startups.

The move is a departure from Nintendo’s usual approach of working with established hardware suppliers. If selected, technology from some of the newcomers may be incorporated into Nintendo’s products or released under its brand, among other possibilities. The Kyoto-based company is seeking creative ideas that may lead to new gaming experiences for the Switch and help the device maintain strong sales momentum. Released a little more than year ago, the console has ignited a turnaround at the company and has sent shares almost doubling.

The Switch, which retails for about $300, is essentially a tablet that can be hooked up to a television or played on the go. It comes with two detachable controllers that are packed with numerous sensors, including infrared cameras and sophisticated vibration engines. Nintendo’s previous console, the Wii U, fell far behind rival products from Sony Corp. and Microsoft Corp., but the Switch’s hybrid approach aptly predicted that gamers were looking for a new kind of device.

Scrum, an early-stage venture capital firm, said it will choose teams to work with before they pitch their ideas to Nintendo in the fall. The VC firm said proposals for software titles won’t be considered. Scrum has strong ties to Japan. Last month it unveiled a joint venture with Panasonic Corp. to identify technologies within the company that could be spun out into startups.

“We are always exploring ways to evolve entertainment,” Ko Shiota, a senior executive officer at Nintendo, said in a statement. “As one of our approaches we look forward to discovering unique technologies that add to the Nintendo Switch experiences through the program managed by Scrum Ventures.”

By tapping outside developers, Nintendo’s unusual approach demonstrates it’s focused on experimentation. Investors have rewarded the company for off-the-wall ideas. Shares rose early this year after Nintendo introduced cardboard accessories that work with the Switch. The cardboard sheets can be folded over the system’s detachable controllers, which have sensors to detect movement, creating toy motorbike handles, a fishing rod or miniature piano.

Nintendo shares rose 1 percent on Friday. That brings gains to 9.6 percent since the start of the year, outperforming the Nikkei 225 which has fallen 4.4 percent in the same period.

The company in February increased its forecast for Switch hardware sales for the current period to 15 million, up from its original estimate of 10 million. Nintendo President Tatsumi Kimishima said he wants to sell about 37 million units by the end of March 2019 and said Switch sales are so far roughly on pace with the Wii, its best-selling home console in history.

©2018 Bloomberg L.P.