If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about TDK Ventures.
- Corporate venture capital (CVC) has proliferated. The last decade has seen the venture asset class explode in size. Large companies are getting in on the fun. From 2011 to 2019, the number of CVCs grew by 390%.
- A fundamental tension challenges CVCs. Firms like Sequoia, a16z, Multicoin, and others have one primary goal: to deliver financial results. CVCs often have a different mandate and are judged according to the strategic value they produce for the parent company. The tension between creating financial and strategic returns can be challenging to navigate.
- Many CVCs fall foul of the same pitfalls. By definition, CVCs exist in relation to a larger entity – this proximity can create issues. Executives may meddle in the investment process, slowing down the fund and burdening it with unrealistic expectations.
- TDK Ventures has succeeded in creating an aligned structure. Nicolas Sauvage, head of the firm, made several careful choices as part of the formation process. In particular, he ensured there was a well-calibrated investment committee able to move quickly and back non-consensus businesses.
- The firm’s NPS score rivals consumer favorites. TDK Ventures reports an NPS score of more than 80. Even among the world’s most famous companies, this is rarefied air – it is particularly striking in the less crowd-pleasing world of venture capital.
This piece was written as part of The Generalist's partner program. You can read about the ethical guidelines I adhere to in the link above. I always note partnerships transparently, only share my genuine opinion, and commit to working with organizations I consider exceptional. TDK Ventures is one of them.
This is the story of an entrepreneur and a startup – though it might not sound like the ones you’ve heard before.
We’re used to innovation coming from outsiders. The tale goes something like this: a renegade founder spots an opportunity and moves mountains to bring a vision to reality. Along the way, they overcome skeptics, setbacks, and failures. They battle giants – big incumbents fat on decades of wealth – and eventually, if they are lucky, they triumph.
What would happen if we changed just one element? Instead of innovation coming from an outsider, what if it came from within?
The creation of TDK Ventures is this remixed narrative brought to life. In 2018, Nicolas Sauvage set out to build something new – a venture firm – but he did so from within a nearly ninety-year-old business. As we’ll learn, the result is a corporate venture capital firm (CVC) that looks almost nothing like its peers. Often thought of as the sleepiest segment of the venture capital space, CVCs tend toward the slow and uninspired, but TDK Ventures moves at the pace of an insurgent. It cares about producing financial returns (not always a given among CVCs) and relentlessly looks to support its founders, measuring its success with annual NPS scoring.
Though an absorbing story in and of itself – involving wild new technologies, cross-cultural negotiations, and strong performance – TDK Ventures also proves what is possible for CVCs. Even multinationals with multiple decades under their belts are capable of creating and competing in the world of venture capital.
Today’s piece will discuss how the firm has succeeded in innovating from the inside out. In particular, we'll discuss:
- The internal entrepreneur. Nicolas Sauvage considered starting a company of his own. Instead, he built a venture firm within a multi-billion dollar deep-tech giant.
- The CVC landscape. The majority of active CVCs have been founded in the last decade or so. Though more companies have joined the party, very few seem to have figured out how to thrive in VC.
- The many mistakes of CVCs. If you were trying to create a non-functional venture fund from scratch, you’d probably make the same choices as most CVCs. These venture arms often have long deliberation processes, short-term time horizons, and consensus-based decision-making.
- Three decisions that made a difference. TDK Ventures made several shrewd decisions. In particular, Sauvage sought mentors, designed a thoughtful investment process, and deepened the firm’s advantage by hiring sectoral experts.
- TDK Ventures’ playbook. How do you put entrepreneurs first? You move fast, proactively help, and provide targeted, unique value. TDK Ventures has found a way to deliver all three.
Let’s get started.
Before we begin, it is worth setting the stage. TDK was founded in 1935, the same year Amelia Earhart flew across the Atlantic Ocean. From humble beginnings as a producer of ferrite, TDK grew into a multi-billion dollar conglomerate traded on the Tokyo Stock Exchange. Over that period, it has embraced each new wave of technological revolution, from its famous cassette tapes to sensors to batteries for electric vehicles and beyond. Indeed, today, TDK is the world’s largest producer of lithium-ion batteries for consumer products – the same types used in our laptops and phones.
Sauvage enters the arena
In 2018, TDK made an acquisition. To expand its hold in motion tracking sensors – think the gyroscope in your phone – the Japanese business purchased InvenSense for $1.3 billion. It looked, in many respects, like a straightforward move. As it turned out, it catalyzed a new initiative in corporate venture capital.
Nicolas Sauvage had worked at InvenSense for two years. Born and raised in France, Sauvage had always been fascinated by technology’s bleeding edge. After graduating from engineering school, he built a career in the industry, starting as a telecom engineer and moving into management positions. By the time InvenSense was purchased in 2018, he was a vital member of the business, focused on expanding its ecosystem.
Before InvenSense’s acquisition, Sauvage had decided to attend the Stanford executive program, a six-week management training course. He took a brief sabbatical to complete his coursework, with the plan of returning with newfound insights. After TDK bought the company, Sauvage followed through on the move, though he had begun to think about another potential avenue post-graduation: starting a company of his own.
Three events at Stanford business school changed Sauvage’s professional trajectory. Though he entered intrigued by the potential of becoming an entrepreneur, a series of discussions led him to realize he might be most effective at innovating from the inside out.
First, he attended a class on corporate venture capital, taught by a professor named Jesper Sørensen. As Sørensen explained, CVC was not a frivolous business escapade but a strategic maneuver. Rather than spending hundreds of millions of dollars exploring new markets with poor results, companies could spend much less to invest in startups in those industries. By doing so, they’d learn about attractive spaces while acquiring equity in high-growth businesses. Sauvage was impressed. It seemed clear that companies like TDK could benefit from this kind of approach.
But who was he to make that pitch? He’d only been part of the company for a few months. He didn’t speak Japanese, and he lived thousands of miles from TDK headquarters. It seemed unlikely he was the right person to pivot a multi-billion dollar business. Though he didn’t know it at the time, TDK had already experimented with venture investing – with mixed results. While some bets had paid off, many others went to zero. Though this is part and parcel of the venture asset class, accounting for failed investments outside of a dedicated fund structure was laborious.
If Sørensen’s session opened Sauvage’s eyes to the potential of CVC, a class with Professor Ilya Strebulaev a week later showcased its perils. Strebulaev outlined why so many corporate venture practices had struggled. For one thing, they tended to move slowly – a reality that meant they missed out on many of the hottest opportunities. Secondly, they often hired almost entirely from internal staff, meaning that investment decisions had a single lens, and usually one without any experience deploying capital. Finally, many relied on consensus-driven decision-making, resulting in a portfolio composed of non-polarizing businesses rather than those with the highest potential.
A final seminar helped Sauvage find the middle ground. Paul Holland had served as a General Partner at Foundation Capital for nearly twenty years. That fund had established itself as an influential industry player in that time, investing in startups like Netflix, Uber, and Chegg. Starting in 2018, though, Holland had begun to work with a new organization: Mach49. That company specialized in helping corporations launch new venture arms, acting as an internal accelerator.
When he learned Holland was giving a seminar on the subject, Sauvage naturally attended. At the end of the talk, he approached the long-time investor and asked him what was on his mind: did he think TDK could create a successful venture firm? On the one hand, Sauvage was sure it could help the business in scouting new areas of opportunity, but on the other, he understood that many had failed before him. Holland gave him an intellectually honest answer: it depended. If TDK structured a fund correctly, there was no reason to think it couldn’t succeed. But making that happen was easier said than done.
Though Nicolas Sauvage didn’t know it, he had a supporter back in Japan. By 2018, Taro Ikushima had worked for TDK for more than fifteen years, rising through the ranks to become Head of the Corporate Planning division. He’d overseen M&A activity in that role, including acquiring Sauvage’s former employer, InvenSense.
TDK regularly invested $20 to $30 million per year into startups, though it did so straight off its balance sheet and without a formalized structure. Though Ikushima thought the activity was valuable, he also began to feel that a more sophisticated design was possible. “I came to think that we have to develop some venture capital activities in TDK,” he recalled thinking.
It wouldn’t take long for Sauvage and Ikushima’s shared interest to bring them together. After his discussion with Paul Holland, Sauvage had only become more convinced by the opportunity. To make sure he correctly approached the problem, he started working with Holland and the Mach49 team, developing his thinking. In the summer of 2018, after Sauvage had completed his Stanford course, he visited TDK’s Tokyo headquarters and had a chance to chat with Ikushima. The pair immediately hit it off. As Ikushima recalled, “it was a very positive chemical reaction.”
Aligned on the need for TDK to enter the venture space, Sauvage, Ikushima, and Holland spent the following months putting together a plan of attack to present to the company’s executive leadership and board of directors. They hoped to show that rather than being a time and resource suck, a dedicated venture capital team at TDK would help the business stay ahead of the curve. Perhaps it could even accelerate its speed of development and commercialization by introducing the business to new technologies and potentially forging valuable partnerships with its portfolio.
By the fall of 2018, they were finally ready to make their pitch.
Nicolas Sauvage had twenty minutes to make his case. After all, TDK’s CEO Shigenao Ishiguro was a busy man, managing more than 100,000 employees across continents.
Sauvage had done his research and prepared methodically. Before he entered the boardroom in Tokyo, he’d decided to spend just seven minutes making his pitch. Rather than focusing on how a venture arm might operate, he concentrated his thoughts entirely on the question of why. In particular, Sauvage focused the sell on the subject of exploration:
I told them that it was all about exploration. We already have R&D and M&A teams, but they’re looking at bringing new products into an existing market or an existing product into new markets. No one is looking for new products in new markets.
Embarking on this discovery wasn’t just in line with TDK’s strategic goals, it was good business. “In our industry, the first to market takes probably 90% of the margin. You want to be first, not a fast follower. I told them that venture investing would help us see further ahead.”
It resonated. As soon as Sauvage had finished, TDK’s CEO said, “That’s exactly what I want.” As Sauvage recalled, underselling it slightly, “it went better than expected.”
Soon enough, TDK Ventures was born, backed with $50 million worth of company money. In less than a year, Sauvage had gone from thinking about starting a company of his own to getting the green light to bring a new vehicle to a storied business. By the time twelve full months had elapsed, Sauvage had added two investment directors, a startup liaison, and made his first investment, backing robot delivery company, Starship. TDK Ventures was off to the races.
The state of corporate VC
The last decade has seen huge growth in the venture capital asset class. While we may be used to equating that with traditional firms, the industry’s growth has also influenced and encouraged the creation of corporate venture firms. Though there are some standouts, many fall prey to the same set of defects.
According to research conducted by Global Venturing, from 2011 to 2019, the number of CVCs grew from 380 to more than 1,850. This figure results in an appreciation rate of nearly 390%. Of active CVCs, 74% were founded in this period, with just 8% founded before 2000. In 2021, a reported ~ $170 billion was invested by this market segment.
Anecdotally, industry observers have witnessed this proliferation and how it has affected even tech royalty. Behemoths like Microsoft and Alphabet not only boast one venture arm but a handful. Alphabet, for example, runs generalist firm Google Ventures, growth investor Capital G, and AI-focused Gradient Ventures. In addition to these activities, Alphabet invests directly from its balance sheet.
According to 2020 data, Google Ventures (GV) is the most active CVC, followed by Salesforce Ventures and Intel Capital. Others in the top ten include Samsung, Qualcomm, and Slack. Given the date of this research, it misses last year’s crypto explosion. For example, Coinbase Ventures doesn’t crack the top ten, but last year the exchange’s venture arm approached GV levels, according to Crunchbase. The firm invested in 111 companies, just six behind the Alphabet entity. Intel Capital invested in 51.
Why have companies taken to the space so aggressively? Tech has become this generation’s business story, and even incumbents have awoken to its strategic value. While R&D departments may fulfill a similar end goal, the process is fundamentally different and usually more directly tied to a company’s core business. Spinning up a CVC allows for broader exploration.
That doesn’t mean that the endeavor doesn’t come without real risks. Though some CVCs have built impressive returns and driven value, there’s a fundamental tension at the model's heart.
As TDK Ventures’ Investment Director Anil Achyuta said, “A CVC is, in and of itself, a little bit of an oxymoron.” It is, after all, an entity designed to innovate within an incumbent business. Achyuta’s observation gets at the heart of the space’s fundamental tension. Namely, CVCs are often pulled in two directions, asked to deliver strategic value and log impressive financial returns. Over-indexing in one direction or another can lead to ineffective funds.
Some CVCs operate as purely strategic vehicles. Indeed, they make up the majority: research from Sauvage’s old professor Ilya Strebulaev showed that 66% of CVCs considered themselves “mostly” or “purely” strategic. Their existence is justified only so much as they create value for the mothership. This makes perfect sense, but it can result in an internal organization with a somewhat sterile sense of purpose. It is hard to play the game of VC rigorously when financial returns are not the measure by which one’s work is judged.
Meanwhile, a much smaller subset of CVCs is focused on generating financial returns for its parent company. Looking at Strebulaev’s research, this group is much smaller, with just 12% considering themselves “mostly” or “purely” financial. Remarkably, just 1% place themselves in that furthest tier.
In some instances, these native firms accept outside capital and, as such, are oriented to maximize performance. Again, this makes sense, but the CVC may diminish its tactical value. Pursuing the best financial returns does not always align with businesses of strategic importance.
Few seem keen to take a balanced approach – less than a quarter. And yet it is this balance that may produce the best results. Beyond this tightrope act, CVCs face several other perils.
It is perhaps unsurprising that Strebulaev’s lecture was a rude awakening for Sauvage. The Stanford academic has conducted extensive interviews in the industry. The research cited above comes from a 2021 report that reads, at least in part, like a catalog of common industry pitfalls. Three seem particularly relevant:
- Short-termism mindset
- Convoluted reporting structure
- Lack of understanding of venture norms
Let’s walk through each.
First of all, many CVCs are judged on short-term results – a choice that fundamentally conflicts with the ten-year lifecycle of traditional venture capital firms. According to Strebulaev’s research, 75% of CVCs say their performance is evaluated on a “short term” basis, often quarterly. Just 10% are assessed on a “long-term” basis. Reviewing venture investments quarterly is like checking who is winning in the first minute of a marathon. It may not be damaging if you’re simply observing, but it is ultimately meaningless. Early winners can crumble, and startups that once appeared dead may surge late.
Perhaps unsurprisingly, many CVCs live with the sword of Damocles hanging over their heads, not knowing whether the parent company will support their efforts from one year to the next. Fifty-eight percent have their budget approved deal by deal, or once a year. A minority receives multi-year commitments or acts as standalone entities, with formal separation from the parent.
Beyond this fundamental misalignment, many CVCs must navigate convoluted reporting structures. While partners make decisions in traditional venture firms, corporate investors often need their investments ratified by unrelated parties. One CVC commented on this fact in Strebulaev’s report, noting:
We all report to the person who started the group who has since moved on to be the head of [different department]. The only reason we report to [this person] is because [they are] the one who started the group.
These seemingly random reporting structures can hinder good decision-making. Furthermore, investment committees often involve many members of the parent corporation and require unanimity for an investment to be made. As mentioned in our coverage of Multicoin, many of the best investment decisions are based on conviction, not consensus. Requiring every party to agree – including many that may have little insight into the business – is a recipe for returns that regress to the mean.
A final complicating factor is that the corporate employees involved in the investment process don’t have a sophisticated understanding of venture capital norms. According to Strebulaev’s work, 61% of CVCs do not feel senior executives understand industry standards. For example, leadership from the parent company might not understand why a CVC may not get the Right of First Refusal on purchasing secondary shares or secure pro-rata allocation for later rounds. Insisting on one of these – or other such stipulations – is off-market and could sour relations with entrepreneurs. It may also contribute to adverse selection.
Though starting a CVC is sensible in theory, giving a business a new avenue for exploration, it can conflict with core timelines, internal structures, and cultural norms. Devising an exceptional CVC is no mean feat.
TDK Venture’s design
Sauvage was fortunate to have learned of Strebulaev’s work at the start of his journey. The galvanizing force of TDK Ventures went into the creation process with eyes open – a truth reflected in the construction of the CVC. TDK’s investment firm has been constructed with great thought and a keen awareness of the mistakes outlined above, unlike many others in the industry. (Sauvage has continued to approach the space through the lens of a life-long learner, frequently writing about the world of CVC.)
The result is a firm that feels like a stand-alone entity and is capable of winning competitive deals on merit. Three decisions have proved especially pivotal in arriving at this point.
Decision 1: Finding the right mentors
Venture capital is a craft that many spend a lifetime perfecting. Many CVCs enter the space without expertise, so these new funds can often take a long time to become competitive, working through a steep learning curve. To prevent this from happening at TDK Ventures, Sauvage decided to partner with Paul Holland and his employer, Mach49.
As alluded to earlier, Mach49 exists to help large corporations create functional, impactful venture arms. The firm has worked with Goodyear, Pernod Ricard, JetBlue, Schneider Electric, and several other large companies. Though Mach49’s approach may vary from partner to partner, it does operate a consistent playbook designed to help CVCs hone in on investment themes, think through necessary resourcing, and identify key stakeholders. Mach49 also helps define the optimal internal structure for the new firm and assists on an ongoing basis, joining internal deal meetings to provide expertise.
While this would be an unusual approach for a traditional venture firm to take – financially-driven firms are typically predicated on the picking ability of the General Partner – it makes perfect sense for a CVC like TDK Ventures. By collaborating with Mach49, TDK Ventures effectively brought a tenured VC into the founding process; today, it benefits from the continued input of Holland’s decades of experience as a successful private markets picker.
Decision 2: Structuring an effective investment committee
Earlier, we referenced that corporations frequently hold their venture arms to a complicated reporting structure that requires unanimity for an investment to be made. Beyond the tendency to result in sub-par decisions, investment committees structured in this manner also tend to move slowly. Getting multiple loosely related parties to coordinate is tricky, especially in multinational businesses navigating different time zones and managing other priorities. Since venture funding rounds are typically completed in days or weeks, this presents a fundamental conflict.
In our discussion, Paul Holland shared the story of an unnamed Japanese conglomerate and the investment process they followed. For every deal the CVC wished to consider, managers would have to write a forty-five page report. Once created, this report was reviewed by roughly a dozen division heads who submitted comments over sixty days. Only if division heads unanimously voted in favor of the deal could the CVC commit to the startup in question. It is no wonder that Holland referred to the company – not a Mach49 client – as the “worst-case” he had come across. By the time the committee had reached an agreement, any credible deal had long since closed its round.
To his credit, Sauvage recognized the risk a slow-moving structure posed and pushed hard for an atypically lean group. TDK Ventures has a three-person investment committee situated in the same time zone. Just two of that trio must assent for an investment to be ratified. Even Sauvage cannot overrule a deal. For TDK Ventures’ head, that was a critical design choice, ensuring the fund didn’t fall into “consensus-driven” decision-making. Clarity on this point permeates the team. When I spoke with analyst Marc Bouchet, he cited it as a core cultural element, noting that “we want people to disagree. Consensus is not the goal.”
Anil Achyuta echoed this sentiment. Achyuta noted that he had initially been against TDK Ventures investing in a humanoid robotics company. While the technology was compelling, he couldn’t see a robust commercial application. However, fellow Investment Director Andrew Maywah was convinced by the opportunity. TDK Ventures invested, and the business is now among the “fastest-growing” in the fund’s portfolio. “I’m so happy that I’m wrong,” Achyuta noted. “The most amazing investments, the ones that return the fund, tend to be polarizing.”
TDK Ventures has optimized itself to move quickly and allow for high-conviction investing.
Decision 3: Hire scientists
It is perhaps surprising that one of TDK Ventures’ other savvy moves was hiring a fleet of scientists. After all, this is an organization with deep technical knowledge – was their venture arm really in need of more of such experts?
Sauvage believed it was pivotal. If the fund was to succeed in underwriting frontier technology businesses, it needed investors that could get into the nitty-gritty. “If you look at our investment team, they’re all engineers,” Sauvage said. “Most are PhDs because that’s what you need when going into deep-tech. We want to make sure that whatever product an entrepreneur is building, we can understand and help them accelerate.”
Sauvage has delivered on this promise, bringing impressive technical players onto his roster. Pete Moran, a former General Partner of DCM Ventures and mentor of TDK Ventures, highlighted the caliber of the fund’s investors, noting that he was “really impressed” by those Sauvage had recruited. “These are rare talents,” Moran said, highlighting Anil Achyuta. Many others echoed this sentiment.
A secondary benefit of this approach was that TDK Ventures’ team arrived with no preconceptions of how the game of VC, or indeed CVC, should be played. “I wanted to recruit people who did not have that kind of experience,” Sauvage noted. “I didn’t want anyone to come in with baggage or biases.” He added that a large part of why he felt confident in this approach was that he had the support of someone like Paul Holland – a kind of “golf coach” who could train recruits in best practices.
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The TDK Ventures playbook
What is the result of TDK Ventures’ critical decisions listed above? What kind of a fund has it facilitated?
Perhaps the greatest compliment to Sauvage’s team is that its playbook resembles many of the world’s significant institutional venture firms. Despite the challenges of the corporate model, TDK Ventures operates with impressive speed, provides meaningful support, and can bring a kicker to the table: access to the TDK mothership itself.
As the venture asset class has attracted increased competition, speed is more important than ever. Thanks to the decisions TDK Ventures has made regarding its investment committee, it can move quickly, fighting for a place in hot rounds.
Pete Moran commented on this fact, saying he had seen the TDK Ventures’ team turnaround deals within 2-3 days – highly unusual among CVCs. Such urgency is not confined to the investment process. Indeed, Sauvage’s team brings similar alacrity to its work even after committing to an investment.
Verdagy founder Marty Neese remarked on how impressed he was by TDK Ventures’ speed throughout the fundraising process. The CEO of the green hydrogen startup was introduced to Achyuta by the team at Khosla Ventures and was impressed by TDK Ventures’ speed in driving toward an investment decision. Indeed, the firm committed quickly and then set to work helping Verdagy with the rest of the round. The pace at which Achyuta and Co. delivered meaningful introductions and connections left Neese pleasantly surprised. “I thought they were moving fast in the diligence process,” he said, “then they hit the nitrous.” Tag-teaming with Khosla, TDK Ventures helped Verdagy pull together an impressive coalition of relevant CVCs, including Doral-Energy Ventures and Shell Ventures. Thanks to Khosla and TDK Ventures’ help, “I believe we probably accelerated our go-to-market by a year,” Neese said.
By moving at the speed of entrepreneurship, Sauvage’s firm commands an impact far beyond most CVCs.
The story above reveals the second key element of TDK Ventures’ playbook – it is an active supporter of the businesses it backs. Again, this is not typical of CVCs. Because many view venture investing as purely strategic, startups are effectively seen as options – if they become large enough to warrant a partnership or M&A discussion, perhaps a CVC will step in. Otherwise, they are best left to their own devices.
Sauvage has a different approach. Throughout our conversations, he spoke about putting entrepreneurs first and relentlessly measuring how effectively his team is serving the companies it backs. That includes running NPS surveys among the portfolio to determine how many are genuinely delighted by the firm’s services. According to Sauvage, TDK Ventures’ NPS score is over 80 – a truly remarkable number. For context, the much-beloved Apple scores a 66. In our breakdown of healthcare startup Levels, we noted that there are just a handful of NPS unicorns: businesses with scores of 90 or above. It may not be long before TDK Ventures joins the ranks of companies like Warby Parker (91) and Tesla (97).
How does the firm succeed so thoroughly here?
Much of it comes down to Sauvage’s decision to hire scientists. Like few other funds, TDK Ventures truly understands what a deep-tech startup is building and provides targeted support. In interviewing portfolio founders, this differentiation came up frequently.
Verdagy’s Marty Neese described how impressed he was by the knowledge the firm brought to the table at their very first meeting. They hadn’t just read up on his industry; Achyuta and the broader team had studied it for several years, building a nuanced understanding of the different trade-offs. “They had been looking for investment in this space for a couple of years,” Neese noted. “Because of that, we had a mind-meld pretty quickly.” Yan Wang, the founder of AM Batteries, made a similar comment. “I was very impressed with Anil,” he said. “He did a lot of technical due diligence.”
The team’s technical expertise directly impacts how it helps. “It’s not just, ‘Hey, we get your tech,’ and nothing happens,” Neese said. “It was, ‘We get why you’re different – now, let’s move.’” In particular, TDK Ventures helps make industry connections and serves as a thought partner on the thorniest of technical issues. The team is also a “great promoter” of its portfolio companies, according to Mike O’Kronley, the founder of Ascend Elements, another of Sauvage’s investments. That can be incredibly impactful, given how hard it can be for deep tech startups to raise money.
Loop in TDK
CVCs frequently dangle the potential of a lucrative corporate partnership to the startups in which they invest. More often than not, these tantalizing possibilities fail to manifest. TDK Ventures does things differently. The firm often looks to loop in its portfolio companies to produce mutually beneficial outcomes.
This process begins by staying in close contact with the mothership. Analyst Marc Bouchet mentioned that he is in contact with teams at TDK corporate “two to three times per week.” He might speak to the component sales team one day and the battery group in China the next. Not only does this connection allow for better diligencing – TDK’s talent is best-in-class and well-suited to vet technology – it facilitates organic partnerships.
One example of this is TDK’s work with Fabric8 Labs. After investing in the metal 3D printing business, TDK Ventures has helped the insurgent team turn the parent business into a customer. “I remember introducing them to one of the division CTOs,” Achyuta recalled, “When they saw what Fabric8 was working on they just said, ‘Man, these guys are blowing us out of the water.’” Impressed by Fabric8’s technology, TDK hopes to rely on the startup for some of its precision manufacturing needs. Not only could that spell big business for Fabric8, but the collaboration is helping the team improve its product. CEO Jeff Herman said that “with TDK specifically they’re also key contributors to our technology,” adding that there was no other investor with which they worked as closely.
The benefits to TDK could also be significant. Achyuta hopes that leveraging Fabric8’s technology will allow his employer to create $300 million to $1 billion in new revenue one day. As he noted, getting a strategic win of that size can justify the entirety of TDK Ventures’ presence many times over.
Not to say that TDK Ventures is struggling to justify itself. The fund that started with a $50 million carve-out received a decisive vote of confidence earlier this year, announcing a second vehicle of $150 million. An uptick of this magnitude is an indication that Sauvage’s work is not only delivering strong returns but producing value across the organization.
Taro Ikushima, Sauvage’s first internal supporter, reported that “Everyone loves Nicolas and [the] TDK Ventures team,” adding that “It’s not only money. Their work is eye-opening to many engineers in Japan and Tokyo.”
It’s a testament to the culture Sauvage has created that many from his team are hungry to improve despite having an NPS score in the realm of the world’s most popular consumer brands. “It’s not a slam dunk,” Achyuta said, “I think we can do better.”
Like few other CVCs, TDK Ventures has created a sense of balance. Rather than fighting the implicit tension between strategic and financial returns, Sauvage and company have found a way to dance across the tightrope. So pronounced is this harmony that it is noticeable even to the entrepreneurs it counts among its portfolio. As Ascend Elements’ Mike O’Kronley remarked, “One thing that’s unique about them is that they’re a strategic investor who invests along a financial investor's lines.”
In charting this equilibrium, TDK Ventures may show the path forward for other corporate venture capital firms. Rather than tacking on an investment arm and seeing what happens, Sauvage’s team shows what can be built by treating the addition with care and forethought. By learning from mentors, creating an aligned structure, and focusing on helping founders, impressive financial and strategic returns are possible. Innovation is achievable, whether it comes from the outside or in.
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The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Our work may feature entities in which Generalist Capital, LLC or the author has invested.