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.

When Junichi Hasegawa of Sony first met the two young creators of Preferred Networks, there was something familiar about them. They each possessed, in his view, the spark and talent of Akio Morita and Masaru Ibuka, the founders of Sony itself. Shortly afterwards, in 2011, Hasegawa, who was in the team developing the PlayStation games console, opted to join the tiny start-up that later became Preferred Networks. Sony was languishing under heavy losses from its once-mighty consumer electronics products and Hasegawa had the opportunity to move on. "Instead of rebuilding Sony, I felt it was faster to build a second Sony," he says.