From firefighter to M&A

So my relationship with Japan began when I first came to Japan in 1987. I was a firefighter and rescue crew chief in the United States Air Force, stationed at Misawa Air Base in Aomori Prefecture.

I had a unique opportunity because we shared the Air Force Base with the Japanese Air Force and the runway was a civilian airport. Half of the fire department was Japanese. We didn't have a lot of fires, and without laptops, iPads, or iPhones back then, we would sit around waiting for fires. I used this as an opportunity to learn Japanese.

I taught myself how to read, write, and speak Japanese. I was stationed here for three years. Going full circle, that's what's brought me to now working for Toyota. I've also worked for Yamaha Motor Ventures, where I was one of the founding members. I ran Dell Japan's consumer business and international business development for Yahoo Japan. I've lived in Japan for over 15 years.

Regarding M&A, when I was in the fire department, we had two fundamental rules. The first rule was that you don't get to choose when the alarm goes off. This is relevant to M&A; you don't often get to choose when a company will go up for sale or when an opportunity comes your way, so you have to be ready to respond. 

Sometimes a company may be running out of money, and it's a rush. Other times, it's competitive, creating the rush. If you want to acquire the company, you have to be ready to put in an offer because they may already have other offers or other suitors circling.

The second rule is you don't go home until the fire is out. This is also true with M&A. M&A is not just a transaction that you close. Once you sign the Letter of Intent (LOI), then go into diligence, sign the merger agreement, and there's a period until closing, followed by integration.

The process may last a year or even two, depending on the level of integration. You have to be there throughout the lifecycle of the transaction. Some people may come and go, but somebody has to be there from beginning to end.

Another thing you learn in M&A, which is a philosophy rather than a rule, is to be adaptable. As a firefighter, if you run out of water, you start throwing dirt. It's not efficient or easy, but it works. In M&A, you can't anticipate what will happen during negotiations, diligence, or integration. 

You have to be prepared to adapt and shift gears quickly. You can't just walk away. You've committed to buy the company, so you do whatever it takes to get it on the right track. That's another lesson I brought from firefighting to M&A.

Anyone who's done M&A, even just one deal, knows there are always fires. They may be small, but sometimes a small fire can turn into a forest fire because you didn't appreciate its potential. For example, when you start doing cross-border deals and look at taxes and regulatory regimes, there are challenges you could not have anticipated.

How did Woven by Toyota got started

Well, Woven by Toyota was originally called Toyota Research Institute Advanced Development, not to be confused with Toyota Research Institute.

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

He recognized a gap, leading 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 transition to what we are today with Woven by Toyota. 

We're focusing on developing technologies for Toyota to transform into a mobility company, not just an automobile manufacturer but a true mobility company. Toyota Research Institute Advanced Development became Woven Planet, which rebranded earlier this year as Woven by Toyota.

Project Kate

When Woven Planet was formed, the idea was that it would be an operating company. We recognized that we couldn't hire the talent we needed at the pace required to develop the technologies we wanted to deploy. We knew that M&A was the only way to fill that gap. 

In 2020, during COVID, I went to the Toyota Motor Board of Directors and proposed setting up a corporate development team with an allocation and budget to acquire talent and technology to accelerate Woven Planet's ability to operate in the market.

Over the last couple of years, the overall strategy for Woven and Toyota has shifted, leading to a rebranding at the beginning of this year. In 2021 and 2022, we completed five different acquisitions. 

One was a pure technology acquisition, but we did four acquisitions with people. Three of them were publicly announced. We acquired the Lyft Level 5 autonomous driving unit from Lyft, which included about 330 people with offices in Palo Alto and London. We acquired Carmera, a startup with offices in Seattle and Brooklyn, New York. We also acquired Renovo, a startup with offices in Silicon Valley.

Later, we did a carve-out from Toyota Research Institute, our sister company. We carved out their autonomous driving team. Even though it was an internal carve-out, it was managed like a traditional acquisition since we were owned by different entities and were in different countries.

Pitching the shift in strategy

There was what we call the 'money slide' in that presentation. It was a chart showing the headcount we had, the headcount we could achieve through our current hiring pace, and the headcount we would need in the future. 

There was a huge gap between where we were through hiring and where we needed to be. The only way to fill that gap would be through acquisitions. It was a straightforward pitch and entirely data-driven. We knew our hiring velocity.

Even before COVID, we understood that COVID would create some challenges, but it didn't fundamentally change our hiring velocity. This was back in 2020 and 2021, before the market took a downturn, and there was still a lot of investment and activity in the autonomous vehicle space. We knew that to be competitive, we had to be able to acquire.

So I have two teams. I have a corporate development team that's part of Woven by Toyota, previously known as Woven Planet before the name change. Then I have a separate team, Woven Capital. 

Woven Capital is a traditional Delaware limited partnership. It's an 800 million venture fund and is self-funded through its management fees. However, it doesn't do acquisitions. It's not a private equity fund; it's a very traditional venture capital fund.

Woven Capital’s strategy

That's actually tied to the transformation from Toyota Research Institute Advanced Development into Woven Planet. We recognized that as Woven became an operating company, we lacked the technology and the know-how to reach our goals in the desired timeframe. 

We understood the need to bring in later-stage companies to help us accelerate into the market. Early-stage startups, like Series A or seed companies, aren't really in a position to collaborate with us on scaling our business. They might be able to do a proof of concept or joint development, but we needed partners that could help us scale our business. 

The idea was to invest in later-stage, more mature companies that are big enough and capable of working with us. With Woven Planet's transition into Woven by Toyota, we also shifted from supporting Woven from an investment perspective to now supporting Toyota globally for all its growth stage needs.

The main drivers would be access to technology, potential technology markets, know-how, and people. When you partner with someone, they bring their people to the table. 

They may be employees of that company, and through a joint development agreement, partnership agreement, or commercial agreement, we're able to access that talent and leverage it for us.

Regarding the size of these two teams, corporate development is currently two people. We lost a few through the reorganization. The former head of the group is now the chief of staff for our new CTO, and one of our members from the integration team moved over to global operations to assist with project management. 

However, we're in the process of proposing a larger programming and platform for Toyota globally. On the capital side, there are 15 people right now with plans to hire another seven or eight over the next year. I was the first employee at the start, building these teams from scratch.

How to successfully start a venture capital arm

It's about knowing people like you and getting introductions to the right people. In fact, my current Corporate Development Lead, a gentleman named Alex Baum, came with Justin Trudell, whom you introduced. 

They were contractors at the beginning and helped me create the presentation and materials we presented to the Toyota Motor Board of Directors. Within 48 hours after getting approval from the board, the Lyft Level 5 acquisition came up. 

We had to pivot immediately into a deal team. The original consulting agreement didn’t cover this, so we amended the statement of work and shifted gears from building a strategy and plan to executing this deal. 

When we launched the deal, I had no employees, just two contractors, Justin Trudell and Alex Baum. Through this process, I got to know Alex, and we eventually asked him to join the team as an employee, and he relocated to Japan. He'll be speaking with you later today.

You introduced me to Justin, who brought Alex to the table. He's now the corporate development lead of the team. Importantly, when we did the Lyft Level 5 acquisition, a carve-out from a publicly traded company, it came without any back office, just 330 engineers. We had to be ready to ingest these people and support them. 

Through Justin, who had existing relationships with KPMG, we quickly looked at several firms for due diligence and technical diligence. We hired many of them to serve as interim HR, interim communications, as we didn't have a team in North America or London to support these new employees. We had to hire attorneys in the U.S. and U.K. and go through CFIUS. 

At one point, the deal team was over 250 people, including contractors and specialists, with about 70 or 80 percent coming through Justin's network. He had helped various private equity firms set up corporate development teams and had a broad network of attorneys, communications experts, HR experts, and management consulting firms. It all started with your introduction.

Leadership in managing people

When we launched this, we didn't have our own dedicated team, so we built that over time. Eventually, we got the corporate development team up to five people. We were leveraging outside third parties and trying to hire our own team to make that internal transition. 

At one point, we had three deals running in parallel: Lyft Level 5, Carmera, and Renovo. They all closed within one month of each other in July, August, and September of 2021. It was a heavy lift.

I liken it to a quote from Reed Hoffman, the founder of LinkedIn. He often describes entrepreneurship as jumping off a cliff and building a plane on the way down. 

Our acquisitions were like jumping off a cliff and building an organization to support the 450 people we were about to acquire. We were starting from scratch in every aspect, including legal, finance, HR.

I recall a funny story from the day the Lyft deal closed. One of the engineers, knowing I was an attorney by training, asked if we had a form NDA. We only had a Japanese one, not one under California law. 

So I contacted our transaction attorneys at DLA Piper to create an NDA using California law. After giving it to the engineer, he asked who was authorized to sign it. We then realized we needed a board resolution to appoint officers. We were literally doing everything from scratch.

It's hard for some to comprehend the extent of what we were doing. Our HR, legal, and finance teams in Japan had limited M&A and English experience. We had to figure it out on the go, using the firefighting analogy of 'if you run out of water, throw dirt.' We needed to support these employees, ensure smooth integration, and provide them with the resources to do their jobs.

Biggest lessons learned

The biggest lesson I learned was around the importance of having people with experience. You can be a lifelong HR, finance, or legal professional, but if you've never done M&A, you don't truly understand and appreciate the intricacies and challenges, particularly in cross-border deals.

When Woven Planet was originally created as TRIAD, it was a domestic Japanese corporation. We had many foreigners on the team, but the back office was all in Japan. They weren’t hired for M&A experience, nor did many have international experience. 

That wasn't part of their job description; they were hired for a domestic Japanese corporation. Then, we tried to buy a company with teams in the U.S. and the UK, which are different.

One complication during COVID was that everyone became remote. While Lyft Level 5 had an office in Palo Alto, few people were going into the office. The team was spread out in about 26 states and six or seven countries, working remotely. 

We had to consider all the different laws and employment regulations in these locations. Our HR team in Japan didn’t have experience with U.S. laws, let alone each state's laws or the U.K. laws.

Before you deal, you really need basic foundational skill and expertise on the team. We used many contractors who did a great job, but they're no replacement for your own team. Eventually, they transition off and hand it over to the business. Often, these are new people we had to hire who don’t come with the transaction history. 

They don’t understand the details and intricacies of why we're doing things the way we are. It would have been much better if we had that infrastructure in place when we did the deal, as that institutional knowledge and history would have remained after the integration was done.

The contractors all did a fantastic job, but they eventually transition off, and when dealing with integration, you want continuity and institutional history and knowledge. They understand why things were done a certain way and can identify temporary measures that need to be changed. 

If the person who knows a fix is temporary leaves, others might mistakenly assume it's a permanent solution, when in fact, it needs to be cleaned up or fixed. This isn't a criticism of anyone; it's a reflection of the nature of M&A, akin to firefighting. 

You wouldn't want to run into a burning building with people who have never been in one before. You want them to have basic knowledge of the regulatory regime, tax consequences, HR requirements, people, cultures.

We were dealing with onboarding people from three geographic regions as a Japanese company ingesting people from the U.S. and the U.K. Even those teams had complexities, like in the U.S., where out of the 330, around 92 were on H1B visas or other types of visas. 

Sorting out whether their visas were transferable was a significant task before we could close. Our HR team in Japan didn't have experience dealing with U.S. visas, which wasn't part of their job description or day-to-day requirements.

That's where I think making sure you've got the right talent in house before making the commitment is probably the biggest learning for me.

A change in strategy

The strategy changed mostly because Woven's strategy evolved. Woven went from Woven Planet to Woven by Toyota, and we really focused on supporting Toyota by delivering what they need.

You may recall that earlier this year, Akio Toyoda, who was formerly the chairman and CEO of Toyota, recognized the need for our parent company to transition. He stepped back from the CEO position but remained the chairman.

He appointed Koji Sato, from Lexus, as the new CEO. This change brought in a new CFO, a new CTO, new executives, and a new organizational structure, which is typical when there's a CEO change.

This initiated the transformation of Toyota, which then had follow-on effects for Woven. So, yes, it's a reflection of Toyota's strategy change, and our strategy has evolved to align with theirs.

The Woven City project

So the Woven City project is the Autonomous City project.  We are still building it. It's on track, managed by Daisuke Toyota here within Woven by Toyota. We expect to have phase one completed by the end of next year, with people starting to move in.

Woven City is a test track for mobility, and when we think about mobility, it's not just cars. We consider mobility in a more holistic sense. It encompasses the movement of people, goods, and information. 

For example, when this podcast goes live, it will be digitally streamed through various platforms, which is a form of mobility. Humans are mobile creatures; mobility is part of the human experience. Consider how food gets to your house or to a restaurant, all the different steps in that process.

Innovating within existing infrastructure can be difficult. One of our goals is to consider how we might design this from the ground up and test new technologies. Woven City is essentially a living laboratory, where we constantly iterate, test, and evolve. 

It's on land owned by Toyota, a former factory site, and this private ownership gives us a lot of flexibility. People will actually live in the city – senior citizens, families, single people, and kids – to test different forms of mobility and technologies.

Yes, we include people with impairments in our technology development. It aligns with Toyota's fundamental mission of mobility for all. We aim to create mobility solutions for everyone – the disabled, the elderly, the young, the professional, the business person. 

It's not just personally owned vehicles, but also fleets, transportation, data, and information. With the direction technology is taking in cars, you often hear the analogy that a car today is like an iPhone with wheels. It's mostly software, and the amount of software will only increase. 

Cars are connected to the internet, accessing data and information. Some of this data may be processed at the edge of the vehicle, while some may go to the cloud. 

This is similar to Tesla's over-the-air updates, fed by information collected from their vehicles, allowing constant improvement in safety and experience. That's the goal for all auto OEMs – to build infrastructure and technology for constant improvement for our customers and end users. 

As I said earlier, we aim to create the safest, most intelligent human-centric mobility solutions. At the end of the day, it's about the person in the middle – creating delight for people so they can fulfill their personal needs, whether that's going to school, work, the doctor, or just traveling and seeing the world.

Dealing with cultural difference

I have lived in Japan for over 15 years and have worked in various roles, including in the Air Force, Dell Japan, Yahoo Japan, Yamaha Motor Ventures, and Woven by Toyota. My experience has shown me that decision-making processes differ significantly between the West and Japan. 

In the West, we often see strong CEOs making quick decisions, sometimes catching their teams off guard. This can lead to extended execution times as the team scrambles to figure out implementation.

In Japan, my experience has been quite the opposite. The decision-making process involves consulting with everyone involved, from legal and HR to facilities and regulators. 

This consultation may seem time-consuming, but it ensures that by the time a decision is made, everyone is on board and knows what they need to do, which streamlines execution. Generally, I believe you still get to market just as quickly, it’s just that the process appears different.

One effective practice in Japan is holding 'GZEN' meetings, which are pre-meetings where you discuss potential resolutions, objections, and concerns with each board member. This approach makes the actual board meeting more efficient, leading to quicker consensus.

Another challenge in Japan, especially in meetings with diverse attendees, is the need for simultaneous interpretation. If interpreters are not familiar with the specific vocabulary and technology, it can lead to misunderstandings. 

We often provide materials or scripts in advance to help interpreters prepare. However, this means sticking closely to the script in meetings to avoid losing the interpreter. It’s crucial to be thoughtful about the materials and presentation style.

Simultaneous interpretation can be challenging for those unaccustomed to it. New team members sometimes speak too quickly for interpreters to keep up, leading to missed or skipped content. 

In board meetings, I would speak slowly and deliberately to ensure understanding. It’s about adapting and presenting material in a way that is clear and considerate to all participants.

Alex Baum Joins the Interview

Noticing cultural differences in Japan

Yeah. Well, for us, my first remit was to get a budget policy and process approved as a contractor to do M&A. And I believe George will tell you this as well - within 48 hours of getting that done, we had a live deal. 

For me, the first day I noticed it was the uncertainty avoidance. We were working with a team that had never done M&A before. We were doing a large complex acquisition.

There was someone who was at Toyota. If you are an employee at Woven by Toyota, you're probably here for the rest of your life. The attrition is incredibly low. You know you have a very safe job. The culture here is not to let people go. You do your time, you do a good job, and you continue to advance through the company.

This was seen as a huge risk to a lot of my colleagues. It took a lot of effort because we had nothing when we first started. Japanese generally don't work without a policy, a process, a procedure, a playbook, and we had none of that. So we had to build that as we were going and give guardrails to people so that they could do their job.

They were very hesitant to just jump in. That would be generally the case without having that experience in the background, but it was much more here for me. And then just having to make decisions. We were put in a lot of situations where you have just enough resources to get it done.

Sometimes you have to make decisions. What I found was, okay, folks aren't going to do that. I need to go make my process - get the executive person or the person in charge to give you that top down, always top down. Then from there, you can make decisions quickly.

We were in a situation where I would describe it as having to operate outside of the normal operating procedure of a Japanese company, just to get things done and it just had to be that way. Getting to win that tension was fun in a way.

It's come full circle. Now, I've gained a lot more experience working in what I would call a more traditional Japanese environment and getting things done by collective support. 

To get something done, you have to have all the decision makers and stakeholders get their input and make sure things are thoroughly considered. When a decision is made, you're expected to know from A to Z how it's going to go. 

It's like a domino; getting to the decision is the hard part. Once you get the decision, the entire structure follows.

Generally, my experience in the U.S. is that you make the decision first and then figure out how to do it. When we first started, we made a decision and then figured it out, which was more Western. I saw some of the challenges with that and gained appreciation for the way the Japanese do things. Now, I also feel the frustration.

For me, people are generally the same; it's their expectations that are different. That's what I've learned in the last three years. It's about managing and finding that middle ground. It's fun.

Relocating to Tokyo

I have a good relocation service. They were really helpful. On my first day before going to the office, I met them at my city ward to help file some paperwork. The relocation team member who was supporting me found out I hadn't ridden the train before and walked me all the way to the office. 

He took the train with me and wouldn't take no for an answer. That was my first taste of how helpful and kind Japanese people can be, which was unexpected. I was super grateful and blown away by it.

Since I already knew a lot of my Japanese colleagues and there were many people coming at the same time, there was an immediate camaraderie. We would all go out together for dinner, drinks, and various fun things. 

Being adventurous by spirit, the challenges like paperwork were frustrating at times. For instance, I missed a Wi-Fi payment and just canceled it instead of figuring out how to get it again. 

But overall, I've been blown away by the kindness and hospitality of people here, and it's been a great experience for me.

The relocation company handled everything, including getting me an apartment. I just had to look for apartments, and the guy spoke English. Even the contract was signed by Woven, making it not that difficult. 

Without the relocation services, it would have been a nightmare. I don’t know how people did this before cell phones because Google Translate has been my savior.

I've been really fortunate. After arriving, there was a slow period for a few months, which I used to explore and make friends. Out of all the moves I've made in my life, this was one of the smoothest, which is surprising to say, but I think it was due to being in the right mindset.

New York vs Japan culture

So, the first thing I noticed when I go back to New York regularly is the reverse culture shock. It's like, 'Oh crap, I can't make eye contact with people.' I'm just walking around in Brooklyn or wherever, and you don't make eye contact with people there; it's a bad idea. 

But things like that don't exist here. You don’t have to be as aware of your surroundings. Also, it's cleaner, safer, and the trains run on time, which are the normal things you appreciate.

Culturally, it's a lot harder to make close friends. Most of my friends are expats. I have work colleagues whom I have dinner with once in a while and consider friends, but the people I hang out with regularly are mostly expats. 

They call it the Japanese wall – it's more difficult to make long-term Japanese friends.

But getting out there, finding cool events and such, in a huge city, you can entertain yourself forever. I've also gotten to travel and explore Southeast Asia a bit, which is great. Overall, I love the city for its food, cleanliness, safety, and affordability.

In New York City, where I lived for about seven years, I made lifelong friends. Here, I've been for a year and a half and, while I've met a couple of people who could become close friends, they're mostly expats. 

Deep connections with Japanese people are much harder, especially since I don't speak Japanese. I've been studying, but it's quite difficult. I got very discouraged after about five months.

Work culture in Japan

The first thing was that I had to wear my mask in the office for much longer than everyone in the U.S. One of the major differences in working on such an international team at Woven is that, to my estimation, two-thirds of the employees are international. 

We're around 2,500 people, and I would say around 1,500 are international. It's like a melting pot of a company. Half the team I work with regularly is Japanese and the other half is from various parts of the world like America, France, or Spain. It's been easy for me. 

Woven was designed to be a mix of Silicon Valley and Japan, and it certainly had its challenges, like misunderstandings and misaligned expectations. The work culture here is more like Silicon Valley, not the stereotypical long working hours in Japan.

The most challenging aspect for me, especially since stepping up into the corporate lead role, is getting consensus across different teams. 

In Japan, when a decision is made, it's like all the stamps have been collected and the decision is just a rubber stamp. This process is very time-consuming, and you have to think in years, not weeks.

We're trying to establish a global corporate development platform across Toyota, and it's been a long process. In the U.S., you might expect to see progress in three months, but here, you measure it in six-month increments. In the meantime, I've found other ways to stay busy and contribute value.

Communication is also a blend here. Many colleagues don’t have strong English-speaking abilities, so speaking slowly and using simple vocabulary is important. The ability to distill complex ideas into bite-sized, executive-level quick hits for someone who's not a native English speaker is probably my biggest challenge.

It's been a great opportunity to learn. There's a Japanese term, 'nobishiro,' meaning to stretch oneself, and that perfectly describes my experience here."

Rubber stamp approval in Japan

You should have all the key stakeholders and process-level people in agreement, confirming that the plan would work and that the stakeholders are aligned. There's a balance, a push and pull, because it's a lot easier to get things done if you have the top person, the executive decision-makers, on your side. 

What I do is socialize with senior-level people with whom I have a good relationship, like my boss. I try to get a top-level approval, like 'yes, this makes sense, let's go figure it out,' and then go get all the rubber stamps before going back to them. You might face skepticism, like 'you're a junior, how are you going to get this done?' 

So, it's about balancing a top-down culture with the need for all the rubber stamps. Having been here for a year and a half, I hope to have more perspective in another year and a half, but for now, I'm still just learning.

Balancing American and Japanese culture

Yeah, the cultural relationships between the first thing we did when we started making acquisitions was to let people operate as is. We didn’t immediately go in with the reputation I've heard about Japanese acquirers, insisting on their way of doing business. We allowed the businesses to continue running as they were. 

The engineers got to know each other over the first six months as we figured out how to work together. This approach had its pros and cons. 

On the pro side, we didn't create a lot of frustration or stifle the business, and we've had pretty good attrition metrics, which I’m proud of. The con was that there wasn’t as much strategic alignment initially. There's definitely a balance there.

We use OKRs to understand what the acquisition will be working on, giving them some freedom to integrate over time. The key is pacing the decision-making, which can be frustrating for people, myself included. 

However, when we have alignment and a clear objective, everything moves rapidly. Once the alignment is there, and ideally, this happens by the time we acquire a company, decisions get made quickly.

It’s super efficient and impressive to see the process in action. It might take time, but once the lever flips, it's a cool experience. You begin to understand why they do it that way.

Maintaining alignment 

Yeah, we have moved pretty fast here, and I believe this is the middle ground we are looking for. There's always a push and pull. Some of the projects we're working on now aren't the top priority as we're trying to hit objectives and move into vehicles. 

Creating a corporate development platform for Toyota isn't everyone's number one priority, and I have to be respectful of that. However, when the decision was made to accelerate because we were behind and wanted to deploy capital, it was impressive. 

It took us just three months to get a billion-dollar budget approved. Over the course of a year and a half, we completed five deals. For any corporate without a long M&A history, that's very fast.

I often tell people that when you build a corporate development team, you might not complete a deal in the first year because you have to build everything. But when the decision is made, the company can move quite quickly. Those were a lot of quick decisions.

This is the experiment, the attempt to find the middle ground. It's fun to be here, to see it happen. It's a great experience.

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