Finding New Mountains: Toyota AI Ventures’ Mission of Discovery

Jim Adler, founding managing director of Toyota AI Ventures, recently gave a popular members-only talk on CVC structures and strategies, in which he shared how TAIV was organized and how his team arrived at its effective model. Now, he has published the first in a series of posts discussing this mission and approach. Please check it out here, and feel free to join in on the conversation on LinkedIn or Twitter. Jim welcomes your feedback and comments.

Since Toyota AI Ventures was founded in July 2017, I’ve received a flurry of questions from startup founders, institutional venture capital investors, other corporate venture capital investors, and the press. They want to know how the fund is structured, how (and how fast) we make decisions, the role of our corporate business units, whether we are truly founder-friendly, and — to address Paul Graham’s point below — what being “strategic” really means for our startup portfolio companies and our big corporate limited partner.

“All other things being equal, [startups should] avoid ‘strategic’ investors. What that word ‘strategic’ means is that they have ulterior motives that are unlikely to be aligned with yours.” — Paul Graham, November 29, 2019

The answer to these questions begins with our mission, and ends with the structure and operation of the fund. To borrow from mountain climbing, our firm’s mission defines the summit we’re seeking, the fund structure is our climbing equipment, and the fund’s operational execution is the actual day-to-day climbing.

Jim Adler

In this first post, I will help explain our mission and why we’re on it — a subject I’ve explored in some of my previous talks. Future posts will detail how we’re structured and how we operate to attract and align with the best startup teams and co-investors. Venture capital has its place in the corporate development toolkit, especially for early-stage investments to discover over-the-horizon opportunities.

Let’s start with the Toyota AI Ventures mission:

We are explorers. Our mission is to discover what’s next for Toyota by helping early-stage startups bring disruptive technologies and business models to market quickly.

Note that we are explorers first. And, like our early-stage startups, we invest to help discover “what’s next” for our business, specifically where artificial intelligence is driving innovations in autonomy, mobility, robotics, cloud, data, and even smart, connected cities. We’re exploring these potential new territories, even when there isn’t an obvious alignment with our current or planned businesses, because we know prediction is difficult, especially about the future. Richard Danzig has written well about the folly of such predictions.

Mountains of opportunities … among valleys of uncertainty and failure

Today, Toyota is valued at roughly $200 billion driven by deep capabilities in, principally, five areas — design, manufacturing, distribution, finance, and one of the world’s most valuable consumer brands. Where will the next set of capabilities come from to power Toyota’s next era of success? The opportunities are many, but the potential successes are few. Clay Christensen taught us that large incumbent companies often wait too long to identify new opportunities — only to be disrupted by new insurgents. They hesitate to wade into the “valley of uncertainty and failure.”

Often, the only superpower a startup has is speed. Without hesitation, startups are incented to quickly traverse the landscape of molehills in search of where the true mountains of opportunity might lie. Startups can serve as sherpas for Toyota to unveil the next mountain of opportunity and the capabilities needed to reach it.

Click here to read the rest of Jim Adler’s post on Toyota AI Ventures’ mission.