How to Stand Up a Venture Capital Arm

In the ever-evolving business world, staying ahead isn't just about what a company does today, but how it prepares for tomorrow. This is where a venture capital arm comes into play. It is a specialized division within a larger company that focuses on investing in emerging startups and innovative projects.

In this article, George Kellerman, VP, Head of Investments & Acquisitions at Woven by Toyota, and Alexander Baum, Corporate Development Lead at Woven by Toyota, share their experience on how to stand up a venture capital arm. 

“Before you commit to a deal, you really need basic foundational skills and expertise on your team. Contractors eventually transition and hand it over to the business. They don’t understand the details and intricacies of why we're doing things the way we are.”—George Kellerman

How did Woven by Toyota get started

In 2016, Toyota launched Toyota Research Institute in Silicon Valley as an advanced R&D center. They were working on autonomous vehicle technology, material science, automation, robotics, but it was all advanced R&D. James Kuffner, the CTO, realized there wasn't an organization within Toyota that could take this advanced R&D and productize it into Toyota vehicles.

This led to the birth of Toyota Research Institute Advanced Development. The idea was to take the technology, productize it, and put it into Toyota vehicles. Along the way, it became apparent that there were other opportunities to leverage this technology.

This led to the birth of Woven by Toyota, which is focused on developing technologies for Toyota to transform into a mobility company, not just an automobile manufacturer but a true mobility company.

Inside Woven, George has two separate teams: the corporate development team that does M&A, and Woven Capital, their $800 million venture capital arm. 

Woven Capital’s Strategy

Woven recognized that as they became an operating company, they lacked the technology and the know-how to reach their goals in the desired timeframe. The purpose of this venture capital arm is to make strategic investments and bring in later-stage companies to help them accelerate into the market. 

These investments are in line with supporting Toyota's broader transformation into a comprehensive mobility company. The main drivers would be access to technology, potential technology markets, know-how, and people.

How to successfully start a venture capital arm

According to George, a huge part of their success in starting a venture capital arm from scratch is networking and getting introductions to the right people. They first got introduced to two people: Alex Baum and Justin Trudell,  who acted as contractors, then pivoted into the deal team. 

Through Justin, who had existing relationships with KPMG, they quickly looked at several firms for due diligence and technical diligence. They hired many of them, and at one point reached over 250 people, including contractors and specialists, with about 70 or 80 percent coming through Justin's network. Through this network, they built their own dedicated team over time.