Software might be eating the world but cars had joined the menu and automotive needed to become high-tech before technology supplants automotive, according to, Jim Adler, founding managing director of carmaker Toyota’s early-stage AI Ventures unit.
Adler was interviewed by Sandi Knox, counsel for emerging companies and VC at law firm Sidley.
Since launching April 2017, Toyota AI Ventures had assembled $200m in funding and a 27-strong portfolio, guiding Toyota towards potentially disruptive early-stage technologies.
Citing his experience as a startup founder, Adler said he had learned to effectively think of new enterprises as market experiments.
“If this experiment pans out then we are going to learn something, or we may buy you if you do. I think that is really what startups are, they are experiments in the marketplace to figure out what might work and what might not,” Adler said. “Corporations are not very good at that. They are risk averse and they do not like to fail.”
Adler also evoked the old maxim of Indianapolis 500 champion race driver Rick Mears when he argued corporate business units were concerned with finishing first, while startups were focused on “first finishing” – that is, surviving.
Indeed Toyota AI Ventures had tried to avoid involving internal business units in its dealmaking process, in light of the likely mismatch between startup and corporate perspectives.
“We absolutely tap them for expertise and due diligence, but we do not let them in until after the close. Then you have a hole platform that does matchmaking between the startup and US activity in the business unit,” according to Adler.
“That works out really because as the startup grows, that balance sheet orientation starts to drive more for P&L orientation, right as the company matures,” he concluded.