Understanding Corporate Venture Capital With Will Fung Of Woven Capital

A corporate venture capital allows investors to directly put corporate funds into external startup companies. Will Fung explains how they do it by sharing his experiences as a Principal at Woven Capital, the growth-stage venture capital fund of Toyota. Together with Scott Kelly, he discusses how they mainly invest on mobility of people, robotics, automation, and AI. Will also explains how a corporate venture capital also comes with the company’s industry influence and network, giving startup founders a bigger chance to achieve significant business success.

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Understanding Corporate Venture Capital With Will Fung Of Woven Capital

Welcome back to the show. I had a really great opportunity to meet with an investor in the corporate venture capital space, meaning these are venture capital funds that represent corporations and their outreach into early-stage and later-stage startups. I had an opportunity to meet with Will Fung, who was the principal at Woven Capital, which is Toyota’s growth Upstage Venture Capital Funds.

They’re representing Toyota and their investment interests. They invest in mobility, people, goods, information, and energy. It was a great interview. I learned a lot about how large corporations delve into venture capital and use not only their venture capital but also their influence in the industry to help companies succeed. Will’s investment focus spans multiple domains, automation, robotics, space techs, and AI.

Prior to Woven, he was at Samsung Catalyst Fund, representing Samsung’s electronics and its startups. Earlier in his career, Will served as a manager and engineer at Kovio, a startup that developed proprietary printed electronic platforms for semiconductor devices. Will was also in 2022 named the top 50 rising stars of global corporate venturing, which recognized the industry’s top investors chosen by more than 2,000 corporate venturing units. I want you all to listen in on a great interview with Will Fung from Woven Capital.

I’m excited to bring on Will Fung from Woven VC. Will, welcome to the show.

Thanks for having me, Scott. I’m excited to be here.

Will Fung’s Career Background And Journey

Me too. Before we get into Woven itself, maybe share a little bit of your background before being part of Woven, your career, and then what you’ve done previously.

Most people in the industry, I fell into venture capital. My background is in electrical engineering. Right out of college, I went to a semiconductor startup in the Bay Area. I’m super excited about getting into Silicon Valley. I was there for several years, but decided to transition more into the business side of things, which I thought was more interesting. I got into business school. I was looking for a summer internship.

I knew I wanted to stay within the startup ecosystem. I was networking with founders, networking with VCs, and got connected with one of Samsung’s venture arms, Samsung Catalyst Fund. They said, “We like your background. Why don’t you spend your summer internship with us?” I ended up joining full-time after business school. I was there for several years. Now I’m at Woven Capital.

All About Woven Capital

Fantastic. Let’s talk about Woven Capital. Talk about the funds thesis, where you’re investing, and how you’re investing, and we’ll go from there.

At Woven Capital, we’re the growth stage fund for Toyota. We look to invest in startups that are looking for strategic capital to either start scaling or scale even faster. That means we typically invest in Series B and later. We’ve invested in series C, series D, and beyond. Check sizes range from 10 to 50 million dollars, but because we’re backed by Toyota, we look to invest in startups that are innovating and advancing the future of mobility.

We think that in four categories, that’s the mobility of people, goods, information, and energy. We think of mobility people as obviously tech that goes inside the car, but we also think of personalized mobility. We have a smart electric wheelchair company in our portfolio on the mobility of goods, that’s supply chain, logistics, and manufacturing. We do all of this inside Toyota, looking for digital transformation across the board.

I’ll also add that space tech is included with mobility goods or sending a lot of stuff up into space. On the mobility of information, obviously, communications infrastructure with the vehicle, but that’s also including data in AI-driven businesses to really help oh our various business units within Toyota. We have Toyota, a very large company. We have a financial arm. We have an insurance arm.

We have dealership networks that we want to support. That goes all into that, and then on the mobility of energy. That’s the EV ecosystem, the hydrogen ecosystem. Climate is tech in general. Toyota wants to be carbon neutral by 2050. These areas are just ones that we believe we can have the most impact and add the most value to these startups, as they also have the most impact on society.

Being the investment arm of Toyota, do you also make investments that are going to be potential clients or partners with Toyota in the future?

Yeah, no, absolutely. One of the superpowers that we have at Toyota is a portfolio success team. They’re really here to support our startups to be their champion within Toyota and also to be shepherds to help navigate them through the large company of Toyota. Toyota has over 300,000 employees, very complicated, with multiple different divisions. Helping to find the right team to connect and make introductions, our companies find it very valuable.

You made two comments. You’ve mentioned startups, and then you mentioned Series B. There’s maybe a little disconnect between those two terms for some of the listeners here. Maybe break down at what actual stage in the company’s life cycle are you getting in? Is it an idea? Are they in revenue, product market fit? Where do you come in from that standpoint?

For Woven Capital, we generally look for product-market fit. We already have promotional traction with several million dollars in revenue growing year over year. It’s not a hard and fast rule. Just given that if you’re a startup working in the hardware sector, you’re generally going to need a lot of capital to get your product to market. We have a couple of examples in our portfolio where, for example, a company called Stokespace, we invested in them last year. They still have not made their first launch into space. These require multi-hundred-million-dollar rounds. That’s where we come in. Also, say that we have a sister fund called Toyota Ventures, and they invest in the early-stage side of things. They do pre-seed, seed, and series A. We pick up from them afterward.

You basically used Toyota Ventures earlier than it developed and became a Woven Capital portfolio company?

We don’t have to invest in their companies, but they will surface up the more interesting ones or the ones that are doing well and ready for our stage. We’ll decide as a separate team whether this makes sense for us to invest in or not.

Focusing On Foundation Models And Under-The-Radar Applications

What trends are you seeing? Obviously, AI is pretty much in everyone’s coming up everyone’s and it’s applied to all kinds of industries. What trends are you seeing that weren’t there 2 or 3 years ago?

I think there’s a lot of hype these days when it comes to foundation models, especially when it comes to physical AI or embodied AI. Many humanoid companies have raised a ton of money. Some of these foundation models are doing general-purpose robotics, and they’ve raised a lot of money. That’s definitely where in this hype cycle of you will on these topics. I think what we’re looking for at Woven Capital is more of these.

They’re very interested in those topics, but also looking for under-the-radar applications of AI and actually bringing tangible ROI. One example is a portfolio company of ours called UVI. They have this large arch with cameras, lights attached to it. Vehicles drive through them, and they use AI to detect any issues, defects, and other potential problems to surface to their customers. They’re used in Toyota dealerships today and with other OEMs, but they’re also used in fleets. They’re used in rental car companies. Many use cases for this type of technology.

If I’m driving down the highway and that company scans my car, will I get a notification that my tire is under pressure, or that I have a bad spark plug?

Yeah, so I guess these won’t be installed on the highway or on the street. They’re going to be at their fixed assets that are at the service drive in the dealership. They can detect any cracks in your windshield, dents, or scratches on the body. If your tire tread is low, and you also scan the undercarriage of the body, you can detect any rust, parts that might be missing. Basically, trying to build trust and transparency when it comes to the dealership service lane.

Success Stories At Woven Capital

You obviously mentioned a couple of portfolio companies already, but maybe you can share some success stories. Talk about some of the companies that you guys got into, obviously relatively early, and had a good outcome towards the end.

I’ll also start with, as investors, we love all our companies. Just in interest of time, I’ll highlight a couple. Just to double click on UVI, as I mentioned, so many different use cases that this technology can be deployed in. We’re looking at putting them into the manufacturing line or end-of-line quality assurance, looking to put them within various distribution centers, and logistic centers to catch potential damages that are occurring between the manufacturing line and dealers.

We’re also helping them to scale across geographies. Most of their operations and sales are in North America, helping them expand into other regions. I’ll also mention Tacta Systems. They’re an advanced robotics company, and they’re getting some pretty rare access into our Toyota factories. Having that deep partnership to understand not just the customer pain points, but what it takes to deploy a complete solution in the field.

Most entrepreneurs think of technology and developing an MVP, and that helps scale from 0 to 1, but scaling from 1 to 100, you need to have a complete solution where you’re thinking about UI, UX, customer interface, and how the complete solution is involved in getting a full product into customers’ hands. The last one I’ll touch on is a company called Weave Grid, which is an EV charging software company that’s designed to connect EVs to the electric grid. We’ve integrated their technology into the Toyota app in certain locations, and in those regions where Toyota EV owners, they regions can enroll in charging management programs with their local utilities for additional benefits.

Woven Capital’s Potential LPs

That’s phenomenal. Let’s talk about it. I understand, you talk about the thesis, some of the great companies in the portfolio. Is this exclusively a portfolio managed with Toyota’s capital? Are you bringing in LPs who invest with you and who you invest with?

In terms of the way that woven capital is set up, we’re a GP LP structure. A fund structure with a single LP in Toyota. Other CVCs will either invest off the balance sheet, or they’re also set up as a fund structure and have multiple LPs. The way that we’ve decided to have our team and fund structured is such as to really have that tie to the mothership and to have that visibility to go across all the different divisions within Toyota.

As I mentioned earlier, with the various arms in Toyota, there’s the financial side, there’s the financial services side, and there’s the insurance side. Through Toyota Industries, there’s also the forklift side and the material handling side that Toyota is a leader in. We try to bring all our portfolio companies to the various arms within Toyota. You mentioned in terms of who we invest in, we don’t have any restrictions, if you will, on who we invest in, but we try to work with the credible VCs and VCs that can add value to our portfolio companies. Like us, we are trying to add value to our companies as well.

Going Beyond The Check And Bringing In More Value

As a corporate CVC, you’re obviously not bringing outside capital. You’re obviously working with the internal capital. Maybe just share a little bit about where you see venture capital going. Obviously, in the course of the last year or so, it’s been a different environment than it has been in the past. You and I both spent some time in Silicon Valley. I was there during the ‘90s and understand the dot-com boom, and everything went there. Maybe talk about what trends you see happening in venture and how that’s affecting how you guys make investments and how you move forward in your portfolio.

I think you and I have seen Venture evolve over the years. There’s a lot more venture capital and institutional, and CVCs. I think what we might see is that the number of VCs might actually reduce in the future. There are so many VCs, there’s so much capital. Everyone’s trying to fight and trying to get into deals, and the way to win is to try to add value. There are only so many startups, and there are so many VCs to match on. There’s a little bit of a disconnect right now. Really, what VCs need to do is think about how they can add value beyond capital? That’s why when we think about working with CVCs and startups, like we want to make sure that we’re here to add value, add strategic capital. What can we do beyond just writing a check to these companies?

Understanding The Concept Of Founder Investor Fit

Any final thoughts, anything you want to share with our audience?

I guess I would say that in previous episodes of yours, actually, you talked about product market fit. You’ve talked about founder market fit, but also there’s founder investor fit. Two things on that are that the obvious one is if you’re thinking about working with a CVC, does that CVC work in that industry that you’re looking to get into, or already working in? The second one is that there are different CVCs, and you can roughly bucket them into three levels.

There are the institutional VCs, the strategic VCs, and what some may call tourist VCs. On the institutional VCs, these are dedicated full-time employees, professional investors, typically set up as a GP/LP structure. They operate more as a one plus one equals three, where the CVC team leverages the parent company to help provide strategic value, additional assets to benefit the startups, but also provides a strategic return to the corporate. On the strategic VC side, you might see some GPLP structures, you might see some balance sheet investors, but they’re generally less driven by financial returns.

They view returns more on the strategic benefits that are being added to the corporation. Tourist VCs, teams often are made up of people from the parent company, don’t have much venture experience, and don’t really have a strong process or strategy. They’re just dipping their toe in the water, investing in startups. It’s really important to figure out which type of VC you’re working with. Again, at Woven Capital, we’re looking for a one plus one equals three type of situation to benefit both Toyota and the startup.

Get In Touch With Will And Woven Capital

That’s awesome. Thank you for listening to our previous podcast. Thank you for the online and in-person endorsement. I appreciate that. Where can people learn more about Woven Capital and get in contact with you?

We have our website Woven.VC. I’m on LinkedIn. My colleagues are on LinkedIn. You’ll see us probably at various events throughout the world. Don’t feel shy to reach out.

Thanks for being on the show. For everyone tuning in, make sure you like, follow, comment, and share this great podcast, and look forward to our future great calls and great interviews with folks like Will. Will, thanks again for being on the show.

Thanks for having me, Scott.

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Welcome back. Just to summarize our interview with Will Fung from Woven Capital. It’s really good to learn some key points for investors, because they focus when you’re working with corporate venture capital. They’re working beyond value, beyond just the money. They’re increasingly competitive venture capital landscape.

VCs have to offer more strategic partnerships, operational support, and access to a large corporate network that are significant differentiators. Honestly, with Woven, they have the opportunity to take not only the mass amount of capital that they have through Toyota, but also Toyota’s network, which can be huge for companies in the space.

He also mentioned something I thought was really fascinating, which is differentiating what he called tourist corporate venture capital. Institutional CVCs like Woven Capital. They’re different. They aim for a one plus two equals three strategy, providing both strategic value for startups and financial returns to the financial parent, which is tailored in this case.

For founders, there’s significant alignment with what they’re doing. If a founder wants to find the right investor, they have to be aligned with that investor to ensure the company’s industries and goals align with the same goals of the investor. In the growth stage, as Will mentioned, it’s got to be product-market fit and commercial traction. You have to demonstrate traction to investors like Will. You’ve got to go beyond the MVP.

On our scale from 1 to 100, a complete solution is necessary. You mentioned UI, UX, customer interface, and a thorough understanding of deployment in the field, not just an MVP. This was a great opportunity to learn another segment of venture capital, the corporate venture capital space, or the CVCs, where they are actually investing on behalf of or for the benefit of their corporate parent. We’re going to have more of these coming up in future events. I encourage you to like, comment, and share, and stay tuned for our next great show.

Important Links

• Will Fung on LinkedIn
• Woven VC
• Woven VC on LinkedIn
• Hello@Woven.VC