Introduction
Our first three reports in this series – a collaboration between TDK Ventures and 6Pages – covered a range of corporate venture capital (CVC) topics. The first report took stock of the state of venture capital (VC) and CVC, and the macro drivers behind the tumultuous investing environment of 2022-2023. Our second report then explored the comeback of robust due diligence, while the third offered a CVC playbook for founders to help maximize value from their investor relationships.
With those earlier reports as a foundation, this final report shares a slightly more “opinionated” perspective on how a CVC should be organized.
The past few years have been marked by low distributions and a growing number of “zombie VCs” no longer investing new checks or raising new money. As we move into 2025 – a year likely to be marked by unpredictability amid the transition of power – we believe it is an opportune moment for CVCs to step back and look at their business with fresh eyes.
Perhaps the key question for a CVC today is whether it is built to last over the long term. We recognize that every CVC will have different strategic choices. Still, we think it may be useful to document our points of view on how to think about these choices. This report touches upon topics ranging from organizing principles and budget allocations to the investment decision processes and post-investment founder support, and beyond.
We hope this report can offer some useful insights for CVCs navigating this environment – especially those that might be relatively new to the game. At TDK Ventures, we are grateful to collaborate with and learn from world-class VC and CVC investors, in addition to interviewing many of them for the Corporate Venturing Insider podcast. The perspectives shared in this report draw from our learnings, experiences and insights.
Background: TDK Ventures
No two CVCs are structured alike or operate in the same way. This report is very much colored by TDK Ventures’ context and experience. With that in mind, it may be helpful to share some background on TDK Ventures as a framing for our later perspectives.
Founded by current president Nicolas Sauvage, TDK Ventures was established in April 2019 as a wholly-owned subsidiary of TDK Corporation (TDK) – a $16B Japanese multinational manufacturer of advanced electronic components. While TDK Ventures is relatively young, TDK Corporation is 90 years old this year – which means it understands the importance of “patient capital.”
From its start, TDK Ventures aimed to be a hybrid CVC with strategic and financial objectives, as well as the goal of contributing to society (“scaling impact scalers”). In the six years since TDK Ventures was launched, it has invested in 42 portfolio companies and grown to $350M in assets under management across three funds. The firm now has team members in Silicon Valley, Boston, London, Tokyo, Zhuhai, and Bangalore.
The team invests globally in early-stage, hard-tech startups that use fundamental materials science to solve hard problems (e.g. battery storage, novel computing, nuclear energy) and address very large markets ($10B+). Check sizes for a first investment range from $250K to $10M, with the majority in the $1M-$3M range. TDK Ventures also keeps 50-60% of its funds allocated for follow-on investments.
TDK Ventures believes that a CVC can and should offer startups tremendous value beyond just financial capital. As part of its commitment to this, it has team members dedicated to amplifying the probability of success for its portfolio startups. The firm is generally organized into three different teams – an investment team, a scaling team, and an engagement team, alongside a small supporting HQ team and a fellowship program.
The investment team are thesis-driven investors that use an intensive research process called “Deep Explorations” to build market and technology insights from first principles, develop competitive landscapes, understand technology arcs, identify strategic relevance and the value TDK can offer, and analyze what it will take to commercialize and value capture. The team aims to find the “King of the Hill” innovators that are most likely to become market leaders within 5-7 years. Once a Deep Exploration is complete, investment decisions follow a process structured for speed – one that can turn around a term sheet in days if needed.
The scaling team, in turn, can augment (not replace) a portfolio startup’s skill sets with knowledgeable advisors in various disciplines (e.g. marketing, finance/accounting, recruiting, HR, legal). The scaling team can provide active support in bridging capability gaps, planning strategy, and facing challenges that arise. This can be particularly helpful for early-stage startups looking to raise their next round of capital.
The engagement team works closely with portfolio companies and startups to facilitate their access to what the firm includes in its “TDK Goodness” promise – i.e. the resources and relationships available across the TDK companies that can help startups scale production and commercialize faster. Depending on a startup’s needs, TDK Goodness might involve early product validation, sharing industry research, collaborating on pilots, introductions to suppliers and potential customers, and access to sales channels.
How TDK Ventures operates is anchored in a higher-level “C.O.D.E.” of conduct that guides the team. The code serves as the team’s core values – to Contribute to society (which is linked to business objectives through the value provided to society); act as One team reaching for the sky (e.g. collaborating to mobilize TDK Goodness for startups); Deliver deep insights (e.g. Deep Explorations, sharing learnings externally such as this report); and put Entrepreneurs first (measured by the firm’s net promoter score, or NPS, among portfolio startups).
What is the role of a CVC?
In our view, the role of any venture investor is to provide value to founders – such as through financial capital, credibility, expertise, relationship networks, and accelerating commercialization. We’ll talk about the strategic and financial motivations for a CVC shortly, but those alone would likely end in failure without an authentic commitment to helping founders reach success.
After all, founders are the ones in the arena – daring greatly, taking risks, and tackling a heretofore unsolved problem. We believe venture investors should earn their right to be a partner on these journeys by adding value. Unfortunately, too many VCs piggyback on and exploit founders’ sweat and passion while pursuing their own objectives.
For founders, one of the key questions they need to consider is who do they want on their cap table and board – especially given how long those commitments can last.
They are more likely to choose a CVC that views founders as its primary customer, rather than its parent company.
A CVC can contribute enormous value in helping a startup accelerate commercialization – particularly if the startup operates near the CVC parent’s industry and core markets. A CVC can connect the startup to the wealth of resources available through the parent, acting as what TDK Ventures calls an “impedance match” or a bridge between the two worlds.
At the same time, CVCs need to keep in mind the pitfalls that can keep them from partnering effectively. The potential pitfalls are all the negatives sometimes associated with CVCs – such as slow decision-making, messy internal politics, misaligned goals, short attention spans, inability to do follow-on investments, and IP leakage.
Even a CVC with the best intentions can fall into one of these traps. Being vigilant means being proactive – designing a decision process for speed, managing internal politics so founders don’t have to, institutionalizing candor and surfacing conflicts of interest, ensuring the capacity for follow-on commitments, standing up teams for post-investment support, and establishing clear policies around sensitive information.
Within the context of the parent organization, the role of the CVC should be distinct from M&A or R&D. M&A (inorganic growth) and R&D (organic growth) operate in areas adjacent to the parent’s core – either taking existing products into new markets or generating new products for existing markets. In contrast, a CVC arm with an exploration mission – in our view – should push out the frontier towards new technologies that address new markets. In so doing, the CVC can help the parent identify potential disruptions and bring back learnings to the parent organization so that it can act proactively on such disruptions, instead of being caught off guard.
CVCs that are committed to building an organization for the long horizon should consider the role they want to play in the broader ecosystem. Often, because of the CVC parent’s standing in the industry, the CVC arm can be in a unique position to serve as an orchestrator connecting the dots and strengthening the overall industry. That might involve bringing startups into the industry fold, serving as an evangelist for a technology arc, or gathering industry participants together around a joint endeavor.
The key choices for a CVC
Because there might be 500+ design decisions that influence how a CVC operates, every CVC is different – in a way that may not necessarily be true for a traditional VC. Still, we believe there are a core set of critical decisions for a CVC – choices that will have a ripple effect on the daily activities and decisions of the team.
While we can’t answer these questions for every CVC, we do have a perspective on how to think about them:
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First, will the CVC’s aims be mostly strategic, mostly financial, or a true hybrid of the two?
Compared to traditional, financially-driven VCs, CVCs typically have a broader set of investment motivations that includes strategic objectives. Most CVCs, however, will lean in one direction or the other. In part, this is because clarity of objective can be useful – too often, the middle of the road is where you get run over.
A 2021 study of CVCs involving in-depth interviews found 66% had “mostly” or “purely” strategic motivations, while 12% had mostly or purely financial goals. Only 22% – including TDK Ventures – had a dual-goal approach.
While all these choices are valid, we are advocates for a hybrid approach in which CVCs retain a connection to the mothership and have financial metrics that align their interests with startup founders. A hybrid CVC can build synergies between their parent’s business units and portfolio startups, and are motivated to pull on other levers to generate value. For instance, TDK Ventures will often broker introductions for portfolio startups with other potential customers or investors.
It’s not easy targeting both financial and strategic motivations (or operating at their intersection, which is how TDK Ventures represents it). It can require rejecting typically accepted tradeoffs by CVC leaders. The CVC’s target returns and metrics/KPIs (key performance indicators) will need to line up with the stated aims. Still, the effort can be worth it – navigating that dual-goal ambition well can make the CVC more compelling to founders as an investor, and more successful through the lens of its parent.
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What legal structure, organizing principles, and funding mechanism will support these aims?
There is no one right answer here, but our stance is that a good structure should establish alignment with the corporate parent while allowing the CVC to maintain operational independence and flexibility. TDK Ventures describes this as a “loose” (but not weak) connection.
Leaders should consider the range of future scenarios that can result from different structures. Without alignment, you might end up with a financially-motivated investment arm that carries the parent’s name but lacks the credibility within their broader organization and the personal relationships to broker connections. Without independence and flexibility, the CVC arm may become risk-averse, move too slowly, or get so caught up in parent-level politics that it becomes a less effective partner for startups.
How a CVC gets its funding budget is a key driver of where it focuses its energies. A CVC structured for the long horizon needs a multi-year funding commitment from its parent. Unfortunately, relatively few CVCs have “full-scale, long-term commitment” from their corporate parent. CVCs tend to run fairly lean and are often under pressure to meet objectives on a short timeline to retain budget support, especially when the parent is facing its own financial challenges. 75% of CVCs are evaluated on a horizon of less than five years and often quarterly – a far cry from the traditional 10-year VC horizon.
In general, most CVCs are investing off their parent companies’ balance sheets, which means they might have to take writedowns that impact earnings. Many are organized as a business unit or part of a business unit (e.g. M&A) within the parent. Only about 25–30% of CVCs are structured as a separate legal entity with a multi-year commitment. The majority either have to get their budget renewed annually or are allocated budget on an ad hoc basis (i.e. they have to go to their parent hat in hand for each investment).
Activities that are funded by a corporate parent but sit outside its operating mainstream can be controversial internally. It is critical for the CVC to have clear, logical reporting lines to strategic corporate leaders – and ideally the most senior sponsor – with decision rights explicitly assigned to roles. Too often, reporting lines are based on politics or history rather than outcomes, and decision rights are unclear or assigned to too many people – resulting in accountability gaps, bottlenecks, and internal conflict.
As an example, TDK Ventures is a separate legal entity but a wholly owned subsidiary of TDK Corporation – the sole LP for its first two funds – with president Nicolas Sauvage reporting directly to TDK’s CEO. This helps TDK Ventures stay aligned with TDK’s core values and business objectives, while allowing for fast decision-making and agility.
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What is the CVC’s investment approach and the “sphere” where it will invest?
A purely financially-motivated CVC will be seeking large financial upside, but might otherwise be relatively agnostic or constrained mainly by the personal experiences and viewpoints of the team (e.g. areas of expertise, beliefs about the future). A CVC with strategic motivations, in contrast, will want to define an investment sphere where it can both add strategic value to its corporate parent and provide value to its portfolio startups.
Often, there is a gravitational pull towards later-stage startups operating in domains that are relatively close or at least adjacent to the parent’s core. This is particularly true for CVCs that lack independence or a multi-year budget. Such a CVC might be tasked with identifying startups that can integrate into R&D, contribute to a product roadmap, or otherwise add a new revenue stream – sometimes overlapping in activities with M&A/corporate development.
If the parent company operates in an environment of heightened uncertainty about the future, our view is that a CVC should be engaging in exploration – i.e. new technologies addressing new markets. This can mean developing its own investment theses, engaging with early-stage startups, and taking on more risk – while still targeting domains of loose strategic relevance for the parent. A CVC that engages in exploration can offer more distinctive value to its parent, while avoiding the political infighting that can come with overlapping responsibilities.
The twin decisions of how far from the core to invest and at roughly what stage will have a host of downstream effects. It will impact the size of the checks, the amount of diligence required, the criteria for investment, the number and type of people involved, the speed of decision-making, and the post-investment support that will be needed.
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How will the CVC add value to startups?
From the outset, a CVC should take stock and assess the assets and advantages it can bring to the table, beyond just financial capital. This means taking a clear-eyed view of the parent’s brand and reputation in the industry, its technological strength and intellectual property, the depth of its expertise and know-how, the quality of its manufacturing and breadth of its supply networks, the reach of its sales and distribution channels, and the organizational culture and capacity to collaborate with outsiders.
A CVC can then structure a set of “offerings” grounded in these strengths, which eventually becomes part of its culture and vocabulary for how it works with startups. It can also be helpful to develop a journey map that lays out the opportunities to add value to startups at discrete points. In the earlier stages (e.g. pre-investment), this might include product feedback and sharing learning from customer reference calls, while later this might be more in-depth collaborations or commercial projects.
In some cases, there may be a need to shore up capability (e.g. marketing, finance/accounting, recruiting, HR, legal) in order to be a more effective partner to startups. For instance, TDK Ventures was surprised to find through its first NPS survey that its portfolio startups were looking for help with marketing – such as writing a press release or launching a product. In response to that feedback, the firm hired a marketing principal as part of the scaling team.
How a CVC works with its parent is often a major consideration for founders. Founders want a CVC partner who is aligned with their vision and will be a hands-on driver in connecting them to priority resources. A large parent can present a sizable relationship “surface area” for a startup to tackle, not even considering the even larger ecosystem the company is probably connected to.
What founders don’t want is an investor with conflicting priorities, who might be frustrating to work with and more trouble than they’re worth.
While a corporate VC might have different motivations than a traditional VC, a CVC should still seek to act (in some ways) like a financial VC and move with speed, especially during the upfront diligence and term sheet process. A CVC’s reputation can be closely tied to the speed of its decision-making. Some startups will also be looking at whether a CVC can make follow-on investments, which, as we mentioned earlier, can be easier if the CVC is structured as a separate legal entity with multi-year funding.
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How will the CVC generate deal flow?
Just like for financial VCs, deal flow is crucial for CVC investors – it’s the lifeblood of their investment activities. Because a CVC can bring more than financial capital to the table, it may find itself advantaged in being able to carve out a distinct, specialized niche based on its parent’s assets and brand.
Of course, this depends on how the CVC operates and the reputation it builds as a partner to startups and other investors. The venture ecosystem is tightly interconnected with high information velocity – which means that reputations travel fast. It heightens the importance of hiring the right team and building a values-aligned culture.
In its early days, TDK Ventures spent a significant amount of time building relationships with 140+ venture investors, accelerators, and universities, and sharing a consistent message of the value it offers to startups. TDK Ventures gets about half of its deal flow from these sources. It also gets referrals from the startups it has interacted with, as well as TDK Corporation’s large employee base.
Because of its “King of the Hill” investment strategy, about one-third of TDK Ventures’ deal flow comes from proactive outreach as part of its research. In a Deep Exploration, for instance, it might look at 30-100 companies and talk to 5-20 of them. Quite often, more than half the time, it finds that the startup that approached them first ends up not being what it considers to be the “King of the Hill.”
We shouldn’t forget that we’re in an age of social media, podcasts, and video content. Treating founders well – including saying no well – should be first and foremost. Forward-looking VC firms today also often have their own in-house marketing and content arms, and investors have become more savvy about building a personal brand on social platforms. At TDK Ventures, Sauvage frequently speaks on podcasts, industry conferences, and university lectures, in addition to collaborating on published articles and case studies. Just as important, however, is the transparency with which TDK Ventures shares its strategy, investment theses, and Deep Exploration areas.
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How will the CVC organize its team?
The emphasis for a VC or CVC is usually on the investing team, which sits at the mission-critical core of the organization. When hiring investors, you obviously want talent with expertise and relationship networks in arenas that are aligned with your investment strategy (e.g., domains, geographies), in addition to financial acumen and business judgment. Because of TDK Ventures’ focus on deeptech, it often hires PhDs and engineers for its investment team.
There are other considerations for team composition. Hiring for diversity of thought – investors who think very differently from each other – can help in avoiding groupthink as well as uncovering the yellow and red flags on investments. TDK Ventures’ first two investment directors hired by Sauvage had very different backgrounds and modes of thinking from each other and from Sauvage, by design. Diversity of thought also leaves space for the “contrarian view” that can garner outsized returns in an industry governed by power law.
One important decision with respect to the investing team is how to give them some upside and compensate them in a way that’s competitive with the broader industry. CVCs are often constrained from offering direct carried interest as compensation, which means team members are vulnerable to being hired away by VC firms offering carried interest. It’s possible to get creative – TDK Ventures has a structured mechanism designed to provide team members with a retention element similar to carried interest.
Beyond the investing team, a CVC should consider what dedicated functions it wants to invest in. Financially-oriented VC firms tend to run lean, often outsourcing many of the back-office functions to avoid unnecessary overhead. A CVC with strategic motivations, however, might struggle to achieve its aims without dedicated post-investment support. In the case of TDK Ventures, as mentioned above, the firm has committed resources to a scaling team that can augment a startup’s skill sets, and an engagement team that facilitates access to “TDK Goodness.”
It can also be useful to have a liaison with the parent organization, someone who is deeply connected and knowledgeable about the internal organizational dynamics. This is particularly true in the early days as the CVC is being established and bringing new people on-board from the outside. Being a liaison doesn’t have to be a dedicated role, but a CVC leader should at least consider whether that knowledge base exists within the team.
Once the structure is in place, a CVC should think deeply about how it will work with the different parts of the parent organization – such as M&A/corporate development, R&D, and the business/product groups. Building alignment and shared expectations will end up making the team more effective in supporting its portfolio startups. At the very least, there should be mechanisms to share learnings – for instance, supporting the M&A team on diligence or informing R&D investments.
TDK Ventures also has instituted mechanisms to share learnings within its own team. There is time protected every week for every team member to share what they learned that week (on Fridays) and read what everyone learned the prior week (on Mondays). TDK Ventures also holds an annual reflection week where the team reflects on the feedback from its NPS surveys of portfolio companies, co-investing partners, and TDK team members, as well as past performance, to explore and brainstorm the changes it needs to make to do better for founders and for TDK.
When these key decisions are answered thoughtfully, they can combine to become a kind of self-reinforcing strategic flywheel. For instance, investing in “Kings of the Hill” should logically maximize both financial and strategic outcomes, which can be highly correlated when a future winner is identified that can lead the market and return the fund. Adding value to a startup via “TDK Goodness” can support both financial and strategic objectives. It also helps build the firm’s reputation as being founder-centric, increasing deal flow and positive references.
Conversely, when these key decisions conflict – for instance, a financially-oriented CVC that touts its ability to connect startups with the corporate parent but lacks dedicated post-investment support – it can result in a disappointing partnership and reputational damage.
The decision process
Investment decisions in venture investing are usually a tradeoff between speed versus rigor. Speed is important because startup investing is often a competitive game. But when VCs began prioritizing speed and cutting corners on diligence in the frothy market of 2021, the result was plummeting valuations during the following years.
Strategic CVCs are often at a disadvantage in moving quickly compared to financially-oriented firms, since they typically have to engage multiple stakeholders at the parent company. (Note that it can be helpful to have financially-oriented
co-investors – such as a traditional VC – in a round to validate the expected returns, versus an all-CVC round.) For a CVC, it is critical to institute processes that can streamline the path to a decision.
But not just any decision – the goal is to arrive at a high-conviction investment thesis. An investment thesis is a clear overview of the opportunity, including what is known, what is not yet known, a set of beliefs which (if true) will lead to outsized returns, and what the investor needs to see to invest. (TDK Ventures looks for startups at the intersection of strategic value, financial returns, and societal contribution.) A thesis should ideally be grounded in deep research and derived from first principles, so as to allow for contrarian thinking.
One way to break the tradeoff between speed and rigor is to start the engine early – before the clock starts. At TDK Ventures, the team can take months to conduct a Deep Exploration, mapping out the competitive landscape and technology arcs, and engaging in discussions with emerging and leading players.
No one can consistently predict the future, but anyone can imagine a possible future. TDK Ventures uses an approach called “backcasting” – working backwards from a vision of an ideal future, and understanding how high-impact technologies will transform industries by identifying the gaps that need to be filled (e.g. a materials science breakthrough). This backcasting work helps the team establish a set of KPIs that it needs to see before it will invest.
Once the deep research is done, the team will have much of the context it needs to engage with a startup that meets the set of KPIs, and turn around a decision quickly. While diligence should still be rigorous, that’s not the same as comprehensive. At this point, the team can home in on the key issues remaining. For one startup, this could be about validating market traction, whereas for another, it could be about governance risk. In most cases, the investing team will be assessing the founders’ capabilities (TDK Ventures likes founders that have a “superpower”). The level of rigor can also be different based on the size of the check and startup stage.
There should be a process in place to gather input from stakeholders without introducing too many bottlenecks or relying on consensus decision-making. The CVC should be cautious about who gets a say and who gets a nay, allowing for many sources of input but very few decision-makers.
Towards the end of the diligence process, a “devil’s advocate” session – where team members can only say why the group should not invest in a startup – can be useful in uncovering unspoken objections. At TDK Ventures, the investment director on point will typically sleep on the feedback, write down a response to all points made by the team, and then make the call the next day on whether to bring the proposal to the investment committee (IC) based on their level of conviction. Even Sauvage cannot overrule the decision.
The IC should be structured in a way that it can be convened very quickly. The ideal number of IC members is three individuals, often drawn from the parent company. For TDK Ventures, the three-person investment committee (TDK Corporate Strategy head, CFO, and CTO) are all situated in the same time zone by design to avoid more complex logistics. Rather than having a standing meeting, its IC only convenes when there is an investment proposal to review, keeping each IC exciting and engaging, and always leading to a decision after 80 minutes.
The decision by the investment committee does not need to be unanimous. Again, this is to avoid consensus decision-making and allow for contrarian viewpoints. For instance, at TDK Ventures, only two of the three committee members need to assent for an investment to be ratified.
The culture of the CVC should allow team members to decline to invest without penalty – even after spending hundreds of hours on research and diligence. At TDK Ventures, the number of investments completed is purposefully not designated as a KPI. Sauvage believes that declining to invest after a significant effort should be viewed as an act of intellectual courage.
With respect to the startup, saying no well is as important as saying yes – especially since investors spend most of their time saying no. Given the time and energy that founders put into the diligence process, investors saying “no” have a responsibility to make the signal as rich and valuable as possible. This might include insight into what was compelling, what they still needed to see, and an explanation of why it wasn’t right for them at this time. While the investor may be passing now, they may want to invest later if their open questions are resolved.
CVCs should be capturing granular data across the full investment lifecycle and funnel (e.g. deal flow, time to decision, returns). Not only will this help track the team’s performance against its KPIs (there should be no more than six KPIs), it also will help the team identify bottlenecks and refine its judgment over time.
Post-investment support
In many traditional VC firms, post-investment support sits implicitly with the investing team, although realistically this is often limited to board responsibilities, supporting the following round(s) of funding, and ad hoc interactions. Strategic CVCs, in contrast, have a broader mandate that typically requires a deeper level of engagement to achieve the desired outcomes.
Before making a commitment to providing post-investment support to portfolio startups, the CVC will have to figure out what that looks like. Is there a dedicated team connecting startups to resources (e.g. TDK Goodness)? Will there be subject matter experts available who can advise and augment a startup’s team? What are the “offerings” on the menu for startups? Is the approach more reactive or proactive?
Dedicated support can be a differentiator for CVCs, since savvy founders know that much of the value of a CVC investor is reliant on post-investment support. 34–43% of CVCs have at least one professional dedicated to supporting portfolio companies.
It’s important to match the available team capacity to the strategy and messaging around post-investment support. It can be easy to fall into the trap of over-promising and under-delivering – especially as the number of startups in the portfolio grows, potentially overwhelming the team. If the CVC is offering knowledgeable experts in functional disciplines, there should be expectations set as to the type of support and level of time commitment (e.g. advisory versus heavy lifting).
Here’s a partial list of what a menu of “offerings” could include:
- Portfolio program manager overseeing post-investment support to help founders navigate the parent’s resources and relationships
- Assigned startup liaison serving as the main connection point for the startup’s CVC relationship
- Feedback on product development
- Industry experts and shared industry research
- Introductions to manufacturing partners and suppliers
- Introductions to other CVCs and VCs for funding
- Introductions to potential customers for product validation and pilots
- Parent company serving as a customer (where applicable, but not as an investment requirement)
- Collaboration on commercial pilots
- Collaboration on R&D/product development, including visibility into roadmaps, technology licensing, non-recurring engineering (NRE) agreements, and joint development agreements (JDA)
- Access to sales and distribution channels, including potential bundling
- Marketing support for branding, PR and press releases, and product launch strategy
- Finance support to help set up reporting and advise on fundraising
- Recruiting support to help fill senior roles
- HR support to help stand up the function and navigate tough decisions
- Legal support to advise on IP issues, NDAs, contracts, and compliance
- Invitations to events or conferences, including exposure at sponsored exhibitions
- Co-branded articles and industry whitepapers
Ultimately, the support provided should be based on the needs of the startup, at the time they need it. The CVC should be providing guidance as to the most productive avenues to start with based on founder priorities. It can be tempting for founders to chase every opportunity and open up so many workstreams that it becomes a distraction from core priorities. Market traction and commercialization, for instance, are often the primary needs that startups are looking for help on from a CVC.
Even during the pre-investment diligence process, a CVC can take an early partnering stance and start working together with a startup. For instance, it can make introductions, provide product feedback, and share learnings along the way – especially if the team is conducting customer reference calls. A CVC that is helpful throughout the diligence process might find themselves better positioned with the startup if the round is competitive.
In general, CVCs should aim for a balanced relationship and try to avoid the power imbalance that might otherwise result from the “large parent company versus small startup” dynamic. TDK Ventures, for instance, aims for “equal win” relationships – rather than a win-win involving a small win for the startup and a big win for the larger company, which often ends with the startup leaving the engagement as soon as they can.
CVCs that are truly committed to the success of their portfolio startups should implement mechanisms to track progress with the same rigor they apply to measuring financial returns and performance metrics. TDK Ventures, for instance, tracks “TDK Goodness” in a large database, capturing all the ways the firm is adding value from the perspective of founders.
TDK Ventures also takes its net promoter score seriously, and views NPS as its most important KPI – the “North Star KPI.” Every year, Sauvage sends a personal email seeking feedback from at least 3 people at each active portfolio startup – 126 emails in February 2025 (not counting responses). He asks three questions that can be answered by responding directly to the email:
- From 1 (“never”) to 10 (“absolutely”), how likely would you be to recommend TDK Ventures to another entrepreneur?
- What was the best value that TDK Ventures brought to you?
- Where can TDK Ventures do better?
The feedback is reviewed by the team during its annual reflection week and solutions discussed to address areas of improvement. Afterwards, the team closes the loop by communicating the changes back to those who provided the original feedback.
Doing post-investment support well can feed the strategic flywheel – generating referrals and high-quality deal flow, increasing the likelihood of portfolio startups’ financial success, and bringing opportunities for innovation and growth to the parent. Having cogent data and metrics on hand allows the CVC to readily demonstrate its track record to all stakeholders.
In Summary
At TDK Ventures, we’ve spent the past six years immersed in a continuous cycle of learning and iterative improvement. Building that muscle took time but the resulting reflexes are paying off now. While six years isn’t that long in the greater scheme – and perhaps we’re being a bit presumptuous in being so “opinionated” at this point – we’ve amassed a body of learnings that we thought might be useful for the rest of the industry.
Part of the rationale for sharing this report is that we are indebted to all those in the industry who helped shape TDK Ventures in our early formative days. In a small handful of cases, the help went beyond just input to deep engagement, standing side by side with us as we navigated the critical decisions that would define the fabric of our culture and organization.
Sometimes we get the question, “Why do we share so much information?” At TDK Ventures, we have found over and over that the benefits of transparency and sharing what others might deem to be competitively sensitive information far outweighs the downsides. We also believe that lifting the CVC industry is a net positive for both TDK Ventures and all founders, who may be considering a CVC to join their cap table, or may already have more than one CVC as investors – especially with the advent of AI and growth of CVCs in general.
If we had to sum up a few takeaways from this report, they would start with holding founders as the CVC’s primary customer. It may be less intuitive than regarding the LPs or corporate parent that provides the funding as the primary customer, but keeping founders in focus has a lot of positive downstream effects that can power your strategic flywheel.
Another takeaway would be to try to break the embedded tradeoffs using first principles thinking. Don’t settle for the easy answer. For instance, the tradeoff between speed versus rigor in diligence can be broken if you come to the table with deep research in hand. Similarly, being a strategic CVC or a financial CVC aren’t necessarily competing choices – they can and should go hand in hand, especially over a long enough time horizon. The same goes for the inclusion of societal contribution as a goal.
Finally, maintain a long time horizon and build a firm that lasts. If you’re in this for the long haul, progress will eventually compound. As Bill Gates put it, “Most people overestimate what they can do in one year and underestimate what they can do in ten years.” That can be hard to remember when the industry tends towards short-termism and sometimes extreme cyclicality. But venture investment is a long game, and so is building a firm’s culture and reputation.