Before Jim Adler, head of Toyota Ventures, became a corporate investor, he was a long-time serial entrepreneur in Silicon Valley. That experience continues to colour his approach to corporate venturing. He views the $500m Toyota Ventures fund as his latest startup — whose success is measured by whether it can help move Toyota into the next era of technology.
But above all, he believes that corporate investors should never lose sight of who they are serving. The startups need to come first, he told the audience visiting TDK’s headquarters in Tokyo earlier this month as part of the GCV Asia Congress.
The corporate venture industry needs to think about their image with entrepreneurs and other syndicate partners, as much as they need to think about the relationship with their corporate parent, Adler said in a debate with Nicolas Sauvage, head of TDK Ventures. It is a view Sauvage — also a former entrepreneur — can sympathise with.
There were three signs of being a bad corporate investor, Adler told the audience.
- The first sign was failing to put entrepreneurs first. Bad CVCs put looking at the innovation drivers — the needs of the corporate parent — first, Adler said.
- Second sign of a bad CVC was being insincere. Adler bemoaned “innovation theatre” — where corporates waste entrepreneurs time with by asking for demos and pitches they never intend to follow through on.
- The final sign was not understanding that startups are different. “A startup is not a small corporation. It is a stem cell that is resilient, fast and creative and can turn into anything but a bear hug by the corporation can snuff it out.”
Adler said CVCs who were just starting out or operating without knowing how to play in the venture ecosystem — were guilty of “violating startups”.
“A startup is not a small corporation. It is a stem cell that is resilient, fast and creative and can turn into anything.”
His comments echoed in a presentation by Sauvage on its formation of TDK’s CVC unit in 2018. Sauvage was keen to learn from his peers and treat startups well. Sauvage has worked hard earn the unit a net promoter score — an indication of whether portfolio companies would recommend TDK Ventures to another entrepreneur — of more than 80%. (Do check out his regular Corporate Venturing Insider podcasts to see how he has done this.)
Sauvage used the feedback from his portfolio surveys to develop its unit, including recent hires of a recruitment professional to help find talent to its startups, a finance professional to uncover non-dilutive funding, such as more than $300m to Ascend Elements, and a marketing executive.
Being startup friendly hasn’t been too much of a departure for TDK, pointed out chairman Shigenao Ishiguro, whois celebrating his 40th anniversary of joining the company. TDK itself was created as a spinout from Tokyo Institute of Technology back in 1935 and had CVC backing at its start. It is now paying this forward, Ishiguro said.
“We need to contribute to society by spending money [on other entrepreneurs] and contribute more to the world. It would be more risky not to have a CVC. Our motto is vision, courage and trust.”
With record numbers of CVCs having launched through the pandemic and continuing in the final quarter of this year, according to GCV Analytics data at the mid-point, the members of the GCV Leadership Society have been volunteering time as mentors through the GCV Institute and Touchstone benchmarking survey to help share best practices and lessons learned through the maturation cycle.
