When Nicolas Sauvage, president of TDK Ventures, set up the corporate venture capital subsidiary of TDK Corporation in 2019 his major consideration was keeping the team small.
“Minimising the size allows you to prove yourself with minimum costs.”
“Minimising the size allows you to prove yourself with minimum costs, while being responsive and helpful to entrepreneurs, even before you have a portfolio to speak of,” Sauvage says.
Sauvage estimated he would have about 50 startups to review a month. “I felt I needed two investment team members, at least one investment director, and one investment associate or, as it eventually turned out, two investment directors.”
He also believed a corporate venturing unit should have at least one person full time for the connections to the mother ship. “It could be the head of CVC if from the corporation, but, in my case, I needed someone from TDK headquarters to be our startup liaison, and this was Toshi Saito.”
The TDK Ventures team, however, evolved and grew. “We stayed with four people in the team for two years. So, this phase can last a bit until the portfolio and number of startups to review grow to a point where adding more team members is obvious,” he says.
How and when to grow the CVC team, though? It is important to keep one eye on the overall economic situation, says Sauvage.
“I had a plan to grow the team gradually, but Covid happened and I did not feel it would be right to grow the team while TDK might be challenged by the pandemic, even though I could and had the budget [to do so].”
He admits the pandemic likely delayed the growth of team: “I started the recruitment in the middle of last year [2021], after we had announced our second fund, and that was probably a bit too tight.”
The verdict on team size?
While Sauvage, like most heads of CVCs, would say there is no “perfect size” for a team, he has a few rules of thumb for a fund with $200M in assets under management.
“Having one investment director and one investment associate per every 30-50 startups to review each month is a good practice.”
Having one investment director and one investment associate or analyst per every 30-50 startups to review each month is a good practice: “This would be more like 50 when the portfolio is small, and more like 30 per team duo when the portfolio grows and the investing team is engaged supporting the portfolio companies.”
Newcomers to CVC should have one full-time portfolio management function within the team. “Every CVC has a different name for this. We use ‘startup liaison’ and ‘portfolio program manager’. Ideally, there should be one per 10-15 portfolio companies.”
Other supporting roles also have a place in a CVC team, according to Sauvage: “You may want to have extra team members on something you want to do in a special way, to differentiate your CVC versus others. For example, we have recruited our marketing principal, our financial principal, and our legal principal to add more unique value – TDK Goodness – than other CVCs or VCs bring to entrepreneurs.”
