E497 | Nicole LeBlanc, Woven Capital: Corporate VC, Strategic Alignment & Value Creation at Scale

0:00What if the world's largest automaker could actually make your startup unstoppable? As a CBC, I have the ability to be a kingmaker because I could bring contracts in for those companies. That's Nicole LeBlanc from Woven Capital, Toyota's$800 million growth fund. But here's the problem every founder faces with corporate giants. Startups don't have the resources and time to force it. So how does a 300 ,000 employee behemoth actually help instead of crushing young companies? Nicole reveals their secret weapon. We have the portfolio success team that can really be this sort of shepherd within the company.

0:32These aren't just empty promises. Watch what happens when Toyota's business units hit roadblocks. They also do it the other way around, where they're already talking to those teams and they come to us with a problem. And then we're able to then go hunting for solutions and companies. But there's a catch that separates the real players from the pretenders. If we're not a good steward of capital for Toyota's money, then the strategic return will be more challenging. The window is narrow, but the opportunity is massive. We're looking for companies before they're raising their Bs. Go to that Toyota Open Labs website because that's specifically only for Europe and we're really trying to build out the European market in collaborations with the European team.

1:07Discover how the world's most unlikely partnership is revolutionizing mobility and why every founder needs to hear Nicole's playbook for turning corporate muscle into startup rocket fuel.

1:20This will definitely turn. Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Welcome back everyone to the EUVZ podcast. Today we're doing yet another of our beautiful corporate deep dives together with our good friend Jebe. Jebe, welcome to the pod. Thank you. And then we're talking to Nicole LeBlanc. Nicole used to be a lot in Copenhagen because she used to be with 2150, good friends of ours here at the show. But today she is no longer.

2:06She is now with WoW and Capital, which is an 800 million growth stage fund. How should I say this? I was about to say managed by Toyota, but it's not Toyota's venture arm. Nicole, maybe you could tell us a bit about that whole investment approach around sustainability, mobility and smart cities. And then after that, we get into the meat of this episode, which is, of course, understanding how to best work together with corporates. Thanks for having me here. I love listening to you guys. You have lots of great people and lots of great topics. So at Wolpen Capital, we're the growth stage venture fund for Toyota.

2:41So we're backed by Toyota and we make growth stage investments in companies that can collaborate with Toyota. So across three key areas, the first being mobility, which is what you'd expect from a company like Toyota. The second being industrial. So, you know, how can we improve our manufacturing processes, reduce cost, you know, improve efficiency, help with sustainability. And then lastly, sustainability and helping us meet our 2030, 2040, 2050 goals. And really those three pillars are intertwined. So companies can often fit in more than just one. Is Womern Capital a balance sheet fund or is it a single LP or what is the legal structure around it?

3:20Yes, we're a single LP fund. So we are set up that way by design. We have a sister fund called Toyota Ventures that does early stage investing. They're mainly based in the Bay Area and they have a similar structure. So all of us are set up because we have both financial and strategic alignment goals. And it was really important to have that separation. Tell me a bit more about that sister fund and why the decision was made to make two individual. So Toyota Ventures has been around since 2016. And they have two streams. So they have their Frontier Fund, which invests in a lot of very disruptive tech that's more kind of general.

3:58And, you know, that would be under mobility and industrial and other categories. And then they have their climate fund as well. And so they have been focused on early stage. So really as a feeder system, if you go to their website, it talks about, you know, we are explorers. So they're really looking for these technologies that can, you know, drive the long term vision of where Toyota needs to go, what we need to be thinking about, what we need to learn. And then as some of those companies were aging and growing, an early stage fund, it's a very different strategy to then bolt on a later stage fund just on top of that.

4:29So the decision was made to create a separate fund. And Wobin Capital is our name. It's a very interesting name because if you look at the history of Toyota, the original founder, his father was an inventor. And he invented the very first automated weaving machine in Japan. And so if we think about where we are now, we're at this, you know, really important, I would say, time in the automobile industry where we're all transitioning to these mobility companies. And we really need to get back to our roots to think about how to weave the past and the future together. And, you know, it really, you know, getting back to our roots around this inventor culture.

5:02And so that's one of the rationales behind that, or that is the rationale behind the Wilkman Capital name. You're touching on a lot there that, of course, relates back then to Toyota. Whenever we do these podcasts, we try and really dig a bit into what is that relationship between the fund and the mothership and why is it actually valuable? How does that affect if you take money from you guys, if you collaborate with you around the cap table? So maybe you can talk a bit about that. Yes. So we, both us and Toyota Ventures, report up through the CFO function. And that's by design because it really needs to be about making money.

5:41If we're not a good steward of capital for Toyota's money and being able to provide that financial return, then the strategic return will be more challenging. So we're really this balance between both the strategic and the financial return elements. At Wolven Capital, the strategic element is much stronger than it is for an early stage fund with Toyota Ventures because it's so much harder to have a strategic collaboration with a seed stage company. need. They're just not ready to work at the scale that Toyota needs, but they're really interested in learning from Toyota and understanding what we're doing and kind of sharing that back and forth.

6:14At Woven Capital, we really have what we call these business unit champions. So we have a portfolio success team. So there's the investment team that looks at making the typical investments, doing the due diligence, being on the board and managing the investment like a traditional VC would. But then we have the portfolio success team that can really be this sort of shepherd within the company. And so they are often co-located with some of the business units. They're meeting the business units. They're understanding what Toyota's priorities are. And they're helping our companies project manage kind of in a way to be able to then navigate Toyota.

6:50So what happens is we make an investment in the company and we found one early collaboration. And it might be with, you know, TME, Toyota Motor Europe. And it's to, you know, do something with that group locally, but it could actually deploy across Toyota globally. But Toyota Motor Europe has a goal of serving their European customers. And sure, they can make introductions to maybe their counterparts in the US or Japan, but we actually take that as an OKR. And that's something that we do is we then are able to then take that company and help them navigate. And we're able to get really great feedback.

7:22So it might not fit the US market for various reasons because the The technology just doesn't apply there or the market's different. So we can give that company that feedback very early and say it's not actually going to work for Toyota. And so then it's about optimizing those resources and getting that feedback loop in place really quickly. So you're part of the investment team, right? So what is your connect to your core colleagues then? Is that part of your job or is that only through your value creation team? So our teams work really closely together. Most of us actually are in Japan. So if you look at the team, we're actually not a huge team.

7:58So we all know each other and we all sit together and we're able to really have those dialogues. We have, you know, like every venture fund, you know, our pipeline meeting every week, a couple of hours long. And our value creation colleagues join that meeting. So it's not just the investment team talking about, hey, this is how we're moving in due diligence, although that's the primary point of the conversation. We also touch on where the strategic alignment could be and how strong we think that is. And how do you leverage the value creation team under due diligence? So it's great. So there's two types of deals where, you know, through our network, if you look at the profile of the investment team, none of us worked for Toyota before.

8:35All of us come from mainly a financial background. We have one engineer on the team, so he always gets the really good detailed questions in. If you look at our team, you know, we're really focused on those, you know, kind of like typical investment elements. And then what we do is we find deals and we would really love to do this deal because we think it's a great fit, both from a financial and a strategic perspective. But we don't have maybe the direct relationship with some of those business units. So our value creation colleagues are able to go in and test the waters and see if this is something of interest, you know, set up a demo, see if they want to do that.

9:08They also do it the other way around where they're already talking to those teams and they come to us with a problem. They're saying this team is looking for a solution that does X or Y, and then we're able to then go hunting for solutions and companies. We may be monitoring that sector as well because we do some thesis-driven approaches where we actually do an assessment of the market and of what Toyota's needs are. So we're sort of monitoring sectors that we know are a priority for Toyota. Sharing a little bit from my own background. So at Merck, what we actually then did when we did follow-on investments, we had a portfolio model and did portfolio ranking.

9:42So we would actually leverage our value creation team in the collaboration between the startup and the core. We would rank that together with a financial ranking. And then it was a classical BCG matrix. Top right corner gets the money and the attention, right? Is that something you do at Bowen? We don't necessarily put it in a matrix per se, but as part of our due diligence and in our quarterly priority setting, we're able to understand what should a priority be for our team and what is the priority for Toyota. So there's a little bit of, I would say, near-term and longer-term strategies where there's some things that are near-term.

10:23We want to reduce costs now. We want Toyota to be more competitive. We want to reduce costs, particularly with everything going on with the geopolitical situation and tariffs and things like that. So there's a couple of areas we're really focused on getting companies to help Toyota now. But there's a couple of other areas, if you look at some of our portfolio companies, where we just really want to understand what the potential is for Toyota to play in this space or to get access to information in this space. So space is actually one of the areas. We made an investment in a company called Stokes Space, and they make a fully reusable rocket.

10:56So both sides of their rocket is reusable. And it's really important from our perspective because Toyota's been doing some work on the lunar rover. You know, is this an area that could be of future strategic value to Toyota? The future of cars is all about connectivity, and space is going to play such a key role in that. And so although it's not something that Toyota is able to do now, it is something that we're going to have to help Toyota figure out for the future. Are there any incentives in line for your core colleagues to collaborate with you? No. So the different Toyota groups, they have their own KPIs and OKRs.

11:30ours. What we have done and we've just started is we have an annual summit and we bring a lot of our, we bring all of our portfolio companies together and we bring and we invite many Toyota colleagues. And then we have kind of like a floor or almost like CES where people could walk the floor, talk to the, you know, the head of BD or the head of engineering for a lot of our portfolio companies so that the engineers within Toyota can really kind of talk technical elements with them and learn about it because we've been able to map to certain business units where we think there's an immediate priority, but we don't know what's going on across.

12:05Twitter is a huge company. There's over 300 ,000 employees. So being able to then make sure that other people could just see organically and apply that to their job. And then we also highlight case studies. So we pick two or three companies that are working really, really well with Toyota and highlight that as an ideal case study. So it's more about the carrot versus the stick at this point. So one of the very, very challenging things in corporate venturing in general is getting the cultural alignment right and integrating your CVC into the core competences. Could you share a little bit more about this conference?

12:39Because I studied a little bit before we went on the show here. Because I've not really seen anything similar. And it seems to be quite successful because you're gathering a lot of people in the same space. So could you share a little bit more for the listener? I'd like to say we're trying to find how to have the best of both worlds. So, you know, as a CVC, I have this, you know, group of this brain trust of, you know, these Toyota engineers and all of these Toyota business units who are deep experts in their field. So in theory, I should be able to have the best financial returns out there because I have all of this customer information and I have the ability to be a kingmaker because I could bring, you know, contracts in for those companies that I know are relevant to Toyota priority areas.

13:23but we all know it's a little more challenging than that. It's not that simple. And so we have multiple cultures within Toyota because although we're based in Japan and a lot of decisions are made here, there's still a lot going on in the US market and a lot going on in the European market that are very localized to those markets specifically. So they have to make their own decisions there. And I would say like just generally between those three large geographies, there's huge cultural differences in the way we work and the way we work with startups. startups. So it's challenging because we really have to spend a lot of face time, you know, with a lot of our business units really trying to understand what their priorities are.

14:00And is this something that they want to bring, you know, a startup in to help? Because if you look at a lot of, you know, kind of CVCs in the auto sector, some have done, you know, gone really deep on batteries, as an example, and made lots of battery investments. We're actually not because Toyota has a huge battery team doing a lot of innovation in-house. And there's really not a lot of room for startups to participate in that right now at this point in time. And so it's really about trying to figure out where the spots are that the startups can play a role because there's sort of like the build by partner analogy we always talk about.

14:30And, you know, we don't want to push a rope. We want to find the willing business units that are ready and able to work with startups because startups don't have the resources and time to force something. We agree. You know, oftentimes I describe, you know, a CDC as an organ transplant. and what you're doing right now is feeding kind of the human body the medicine, right? So that is the culture for me, right? It's C-suite and board talking about, you know, the CDC at all point of time and how important innovation is. So I think it's spot on what you're doing. Super, super interesting. So you recently made an article for Forbes on value creation.

15:12Could you give us a little bit more detail on that one? Because, you know, I read through it. I'm 100 % in agreement with what you wrote. So let's bring this to the listener. Sure. So there were three main points on that. And it's really about kind of like the changing mandate of CBC. When you think about, you know, CBC in general, it used to be just these big corporations putting small checks out everywhere, They're really just using it as a business development tool, trying to hedge against maybe internal projects or trying to figure out who is going to be the winner. And that's not really the case.

15:45Like if you look at like a lot of your previous guests, and some of them have mentioned this, that their teams are, you know, financially motivated. Their teams don't come from the corporate HQ. And, you know, we're there to really try and bridge the gap between, you know, those two types of organizations. And so there's three things that we feel CVCs can bring to the table. And that's what we try to do every day. The first one is subject matter expertise. So we have engineers, like as an example, I spend a lot of time with our hydrogen team. And these engineers and technical and business people have been working on hydrogen for 25 years.

16:18They're deep experts in this field and they're deploying and they've seen the highs and the lows and the highs and the lows. And so we're able to really bring that deep expertise to the startup. So that's really important that they can get this real-time feedback as to what's going on with a friendly customer. So we want to be collaborating with all of our companies. And so it's across all of those sectors that we can bring that subject matter expertise. The other one is scale. And so that's something that Toyota really has. We sell well over 10 million cars a year. We have the Toyota production system.

16:51And we're able to really help give that feedback to our startups. Sometimes it can be technical. Sometimes it can be business. But really helping them understand what we're doing at scale and how to bridge the gap for them to get there. And then lastly, it's about long-term value. So although we do have financial returns as a motivator, a lot of the projects that we're working on within the automotive industry, there are three and four year design timelines. And so if a startup is willing to be in that process, it's a lot of work at the beginning to build the relationship and to go through all of the requirements.

17:29But once you're there, you're in that process and you have that stability that comes with that. And so a lot of CVCs can bring that long-term vision to the table. So those are the three things that we really spend a lot of time thinking about with our portfolio. When you kind of talk about this subject, are there any of your portfolio companies that you normally highlight? A couple. So we actually have three in Europe. So we are a global fund. Most of us are based in Tokyo right now, but we have 16 investments, three in Asia, three in Europe, and then the rest of them are mainly in the US. So the three in Europe, we have a German company.

18:08They actually, nicely enough, they hit all three of our pillars. So we have a German company in the mobility sector. They do virtual sensors. It's called Compredict. And they can actually help remove hardware from the vehicle, which is a cost-saving element. And then they increase the functionality, particularly around preventative maintenance, which is really important around the longevity of things on the car. So that's number one. The second one, and they're working actively. So they started working with our team in Europe, and now they're starting to work with our team in Japan. Then another one is called Chapeo.

18:42It's a French company based in Paris, and they're helping with supply chain visibility and supply chain elements. Particularly, you know, it's becoming more and more evident that that's really an important part to be able to have control over. And so, again, they started with our European group, but we're bringing them into the U.S. market with us as well. And then lastly, on the sustainability side is a company called Corvus, so a great Nordic company based in Norway. And they are focused on zero emission shipping. And so they have batteries, but they're also using our hydrogen fuel cell. And we're able to really help them hit those goals.

19:17And that's an adjacent market for us. So it really helps us understand what's going on with hydrogen in a market that we normally aren't actively in because, you know, we don't make ships and it's likely not something that we'll do. So those are the three that we talk about, and all three of them have very active collaborations with our different business units. Having that in mind, then going back to your Forbes article, right? One of the discussions there was also, as a founder, how should you choose between a VC and a CVC? Yeah, I think it's really important for the founder to know what they're looking for from their investors.

19:52So if they really do want that corporate alignment, and there's pros and cons that come with that. So sure, we can bring this really quick, real-time feedback loop. We can give them technical or business information and data on what's important for us as a customer. But at the same time, you know, if we could be a potential acquirer or they have more than one OEM, as an example, on their cap table, it can actually be a lot of juggling for them to be able to understand the conflicts of interest and how they're going to interact, you know, with that corporate. So it's not for everybody. I think it's just really important for the founder to know what's the value this CBC brings, but what are the challenges that come with it?

20:35And a lot of it depends, you know, on the different models as well. If it's a balance sheet investment versus, you know, an LP, you know, kind of like a separate entity investment, they often have different mandates and different goals and really trying to understand, you know, how they work closely with the M &A team or, you know, how closely they work with their business units. As an example, we have a firewall between us and the business unit. So I go to the board meetings and my colleagues go to the board meetings that we're on, but we don't share those decks with our business unit. And we've been very clear with our companies that we don't do that.

21:06Now, if I think something's very relevant and I'd like to share it, I get their permission and say, do you mind if I share this section or if I share slides five to eight with the business unit? And we often have a monthly or a quarterly call set up so that all of them can talk. And sometimes they're talking without us, which is great. They don't need us there. And so it depends on the company. We're really trying to manage that conflict of interest element very closely because we think it's really important to have that transparency with the founder. I think it's really important, right? I'm one of the ones that are super pro CVC.

21:38Of course, otherwise I wouldn't run this. And I think oftentimes, you know, as a CVC, you bring even more to the table, right? Because of the network you get from, on your side, from Toyota, right? Can I ask the both of you a reverse question then, so to say, because now we ask the question, what should founders look for? Why is it good? And so on. What would you say are the signals, both for a founder or a co-invester, that this corporate is maybe not a good partner to get around the cap table? Seeing that board interaction is really important. So who's going to be on the board? That's a very important question to ask.

22:18Who's going to be the observer, the director on your board? And if it is the investor and not the business unit, ask that clarifying question, like how involved is the business unit? So making sure that you understand how the triangle of founder, investor and kind of corporate business all work. I think that one's really important because, you know, I have relationships with the business unit and it's about, you know, kind of the bigger value chain. So this might be one of many investments. So I think that's really important is having like the understanding how that works. Number two is, you know, really understanding what the M &A strategy of that corporate is.

22:54So look and see, are they acquiring a lot of their portfolios? And if so, you can ask them, like, you know, what is your intentions with me? And, you know, am I on this agenda or not? And, you know, how does that process work? Because are you going to be sharing information as part of this acquisition? So I think that, you know, there can be, you know, some concerns there from founders. So it's important that as part of due diligence, you're diligencing your investor every time, just as much as we're diligencing you. And you really need to understand what that looks like. And there are legal ways to protect yourself.