TDK Ventures: Innovating from the Inside Out

Hello friends,

It’s great to be back with a mid-week edition of The Generalist!

Today, I’m excited to share the story of how a nearly 90-year-old company created a cutting-edge in-house venture firm. It is the origin tale of TDK Ventures.

One of the main reasons I found this to be such an interesting topic is because it’s a story of how innovation can occur inside a massive company. Given our readership here, I suspect that might be of interest to many – it’s a subject that’s under-discussed but hugely impactful.

Another driving factor is that TDK Ventures invests in some of the most far out businesses I’ve come across. That includes food delivery robots, 3D metal printers, contact lenses with LED screens, and all-electric planes. It’s a sci-fi future founded on human ideals.

If you want to understand how a business founded in 1935 in Tokyo has become a player in Silicon Valley, jump right in below. ​
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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.

TDK VENTURES: INNOVATING FROM THE INSIDE OUT

Actionable insights

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.

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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. We are familiar with a tale that goes something like this: a renegade entrepreneur 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 dig into:

• 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.

Wishing you a lovely Wednesday and see you all soon!

Until then,

Mario