Starting a Corporate VC: An Olympic Approach

I wasn’t searching for an analogy when I began thinking about writing a piece explaining how to start a corporate venture capital (CVC) fund, at least not on a conscious level. But while watching the Tokyo Olympics this summer, I found one: When we set out to build TDK Ventures, we approached it the way an athlete approaches her goal to become the best in the world. We clarified our strategy. We began training with the best coach we could find. We built a team that supports every aspect of the endeavor. And most importantly, we started practicing.

What I wish I’d known

If you’re planning to launch a CVC that you’re committed to making world-class — and I hope that’s your goal — the beginning of the process is the time to start getting in world-class shape. But first, I encourage you to spend 30 minutes listening to this conversation, which covers 50 of the most important things I learned while designing, building, and launching TDK Ventures.

As far as I know, this video is unique in that it puts everything you need to know about starting a CVC in one place, which means you won’t have to pour through hundreds and thousands of blogs, presentations, articles, and books, not to mention one-on-one conversations with experts. I am confident that this is the most valuable 30 minutes you’ll spend, not because I’m a font of wisdom, but because I learned what I know from the best, who willingly shared their expertise to help me succeed. I’m thrilled to have the opportunity to carry their generosity forward and share what I know with you.

Start by building muscle

Just ask any athlete whose goal is to compete in the Olympics: In the beginning, your job is to build muscle. In the context of a CVC, that means building your infrastructure.

One of the most important decisions I made while building our infrastructure was hiring the best coach I could find, Paul Holland, to guide me through the process of designing and launching a world-class CVC. The timing of our meeting was perfect. I was taking an evening class at the Stanford Executive Program, and Paul, a long-time general partner at a top-tier financial VC, was just beginning his exploration of how to help accelerate the development of new venture workforces inside large corporations to drive growth. Today, Paul is our general partner in residence, a term I coined to convey the tremendous breadth of what he does for TDK Ventures.

Paul’s deep and wide venture expertise was essential to my ability to assemble what stands behind and supports every Olympian endeavor: an amazing team. When I began recruiting investment directors for TDK Ventures, I intentionally sought out candidates who were as different from me as possible. There is true diversity in our backgrounds, interests, world view, and perspectives. That diversity is an absolute asset, but we still had to work on building up less developed muscle groups so that we were all moving toward the same goal. That was yet another occasion when having a great coach was critical.

Paul also coached us through the process of developing relationships throughout the ecosystem, particularly with those whose expertise covers gaps in our own. He continues to be with us every day, teaching us how to avoid pitfalls, develop the discipline, mindset, and best practices critical to our success, how to strategically engage with startups, and many other valuable lessons.

As a team, the investment directors and I built muscle by practicing how we evaluate investment opportunities. What should we look out for? What questions should we ask? What should we focus on in the presentation deck? What information is missing from the start-up’s deck that we need in order to make an informed decision on whether or not a deep dive is warranted? Our goal was high quality, not speed. We practiced until we were comfortable; we didn’t know everything, not by a long shot, but we could do the exercises without having debilitating cramps the next day.

Before I move on to reflexes, I want to call out another muscle-building exercise we did from the very beginning. Every Thursday afternoon, we dedicated two hours to startup presentations. Each investment director had one hour to present up to three startups he believed had potential. During these sessions the investment directors were coached on what needed to be presented, and how it needed to presented, in order to convey an actionable and balanced picture of the startup being considered, one upon which a thoughtful decision could be based. In an organization that considers thousands of investment opportunities each year, skillfully presenting those with potential as clearly — and ultimately as quickly — as possible is more important than it might initially seem.

Then, build reflexes

We gave ourselves three months to focus on muscle building before we turned our attention to reflexes, which took us four to five months of practice. For an Olympic swimmer, this would entail strategizing how to win by shaving split seconds off the 100-meter freestyle. For us, it meant leveraging the muscle we’d developed — i.e., the ability to ascertain what parts of the information at hand matters most — in order to review projects from entrepreneurs more efficiently. Rather than looking at 100 percent of the information, we trained ourselves to look at the most important 30 percent.

Rather than winning a medal, when we began building our reflexes, our goal was to get better at serving entrepreneurs. (That is still and will remain our unwavering goal.) We learned when and how to deep dive, and then we trained ourselves to do it more quickly. We receive an enormous number of projects for consideration (averaging one hundred per month over the last two years). If we aren’t highly skilled at evaluating them and quickly deciding whether to decline the opportunity or request more information, it’s not fair to anyone on either side of the decision.

Create a way to share the right information

An athlete in training and the people she relies on for expertise and support don’t need to share every single piece of information each and every day. They need to share the right information — information that helps the athlete attain world-class level, and information that helps her support system become more attuned, and responsive, to what it takes to get her there.

For your CVC to succeed to its fullest potential, there needs to be a fluidity of ideas back and forth between the entrepreneurs you’re serving and the mothership. It’s up to you to make sure the design of the CVC enables that exchange between the mothership and startup ecosystem in a way that’s both respectful and useful. I think of it as a membrane, which filters out an incredible amount of information to ensure that only the right bits of it land where they’re needed.

Other habits to get your CVC into world-class shape

Many of the lessons I share in the video were also addressed in this piece on launching a startup within a large corporation. I encourage you to read this as a companion piece to the video. I want to highlight a couple of the tips I think are important if you’re anywhere in the process of launching a CVC.

First, focus on your why. It’s one of the most critical aspects of your endeavor and always will be. As I’ve said before, when you’re seeking support — whether it’s from the CEO who is considering your proposal, candidates deciding whether or not to join your team, or partners you want to sign on — it will be because they are aligned with your why. My advice is to ask that one-word question of every aspect of your CVC’s design. To get started, ask yourself why your idea is critical to your company’s ability to thrive in the future? For TDK Ventures, the why is rooted in exploration of new markets and new technologies that will pave the way for our company to continue making meaningful contributions to society in a rapidly evolving world. For those of you who are clear on your CVC’s why, congratulations! You’re 90 percent there with regards to the membrane I mentioned earlier. You know the mothership. You know what it cares about, and wants to learn, and therefore you know what startups with which it wants to engage.

And second, like an Olympic athlete in training, surround yourself only with the best. That includes your coach, of course, but it also includes a range of others inside and outside your company who make up your support system. Remember that no entrepreneurial endeavor, or athletic career, has ever succeeded entirely on its own. It’s important for you to seek out the best experts with whom to partner, and it’s equally important to do your due diligence to make sure a person who claims to be an expert is, in fact, an expert. If the person claiming to be an expert has not racked up a list of demonstrable accomplishments, proceed with caution.

Plan to succeed

Finally, plan for your CVC to be very successful. I cannot imagine that any Olympic athlete has ever set out to accomplish anything less than winning the gold medal one day, and you shouldn’t either. As you’re preparing to launch your CVC, begin sowing the seeds for the second fund. Even though you’re very much at the beginning of your journey, now is the time to get comfortable with the fact that you are going to be successful. In spite of the fact that you haven’t yet secured your first fund, now is the time for you to begin planning the second.

In the near future, I’ll share my experience with that very process. Because TDK Ventures is still in its infancy, because we are still hitting our stride, everything is new to me and I appreciate in a very immediate way the importance of learning from those who’ve gone before me. My plan is to pay it forward by open sourcing everything I’ve learned, including how we raised our second fund, which will be the subject of an upcoming article. As a future CVC, I hope you’ll join me in my commitment to transparency, sharing best practices across the ecosystem, raising the bar higher, and, ultimately what I care about most: helping more entrepreneurs be more successful. In addition to being the right thing to do, it’s at the heart of the why that drives TDK Ventures. I hope it will one day drive your CVC as well.

President of TDK Ventures, investing in — and serving — early-stage hardtech innovative startups