Toyota’s lucrative venture has potential but to bloom it needs an ecosystem that provides advisors with product expertise and genuine corporate customers.
Toyota has become the latest Fortune 500 company to launch an AI focused capital venture fund.
During the initial stage, it will deploy $100 million into it and it will operate as a subsidiary of Toyota Research Institute. This is significant because the auto manufacturer has strategically positioned itself as an ROI rather than a strategic focused fund, meaning it aims to operate and profit like its venture capitalist peers.
The company has place Jim Adler as the managing director of the fund. He has earlier been the vice president of Toyota Research and comes from a product background.
Till date, Adler and his team have made three strategic investments, viz.:
- Nauto – developing autonomous vehicle technology
- SLAMcore – developing visual tracking and mapping algorithms
- Intuition Robotics – developing a robot companion for the elderly
With Toyota Research Institute’s providing its technical expertise, Adler’s team says, their strongest value addition is helping startups map out their business problems, focus on those that are worth solving and build improvements to their core technologies.
Founders of AI startups have the common experience of having little to no issues raising capital, although they avoid corporate venture as much as is possible.
In a market insight they reveal that there is an unease in the market regarding corporate ventures since its felt that when they promise to high ROI rather than becoming strategic investors. The situation has become such that even small startups question whether even small intellectual property (IP) and strategic risk warrants corporate involvement, especially at the volatile seed stage.
“We let startups lead these kinds of discussions,” said Adler when asked about this tension. “We’re not here to extract IP from these investments.”
With the degree of difficulty related to effectively running corporate venture arms, especially AI startups, Toyota has structured the fund as a separate company than an on-balance sheet entity.
Toyota is likely to follow and lead both seed and Series-A deals.