How to Stand Up a Venture Capital Arm

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I'm Kisam Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Hello M A Scientists. Welcome to the M and A Science Podcast where you learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about the products and services we develop to support world class M A teams or want to get involved with our community of forward thinking M and a practitioners, visit mascience.com you can get started by subscribing to our free weekly newsletter for latest insights and events. Again, that's mascience.com this is a two part conversation with George Kellerman, VP, head of investments and Acquisitions at Woven By Toyota and Alex Baum, Corporate Development Lead at Woven By Toyota. George talks about how Woven started while Alex will focus more on the cultural differences he encountered in Japan. I'm your host, Kisan Patel, CEO and Founder of M and A Science. Joining me today is George Kellerman, vp Head of Investments and Acquisitions at Woven By Toyota. Woven By Toyota is a wholly owned subsidiary of Toyota that is focused on building the safest, most intelligent human centered mobility for all. George, how you doing today?

I am living the dream. Thank you for having me.

Thanks for making this happen. We are here live Anthel Woven by Toyota Headquarters in Tokyo, Japan I got my kid with me. Shyla, thanks for making this happen. Taking the time with us today.

Yeah, well thank you for coming out to Tokyo to meet with me. Actually we first met about three years ago, but this is our first chance to meet in person and I do need to do a little shout out for you. When I was first here at Woven I was a team of one and I was looking for help and advice on setting up our corp dev team. I don't remember how we first got introduced, but you and I met and we spoke and you actually introduced me to Justin Trudell, who I brought on board to help set up the strategy and the team. And we then went on to do $750 million worth of M&A, five different transactions. So really, a lot of what we've done is thanks to your support and the guidance that you gave me early on in the process.

I'm glad. They say the most thoughtful gift in business is a thoughtful introduction, so it's great.

It really is. I'm glad you've been. You're out here. I think we first met during COVID so this is our first chance to meet in person. But thank you for having me here.

I know there's some fun little things we're going to expand on from that.

Yeah, absolutely. As you mentioned, I am the VP head of Investments and Acquisitions at Woven by Toyota. We're a wholly owned subsidiary of Toyota. I run the corporate development team, but I also run Woven Capital, which is an $800 million venture fund. We're the Growth Stage Fund for Toyota, and so we're mostly making Series B and later stage investments. Potentially over time, those investments may serve as part of our M and A pipeline. That's actually one of the goals of the fund. To date, we haven't acquired any of our investments, but that is something that we may look at in the future. But since we're here today talking about M and A, I'd prefer to focus a little bit more on the corporate development side of things. I actually started my career on Sandhill Road in Silicon Valley. I was an attorney at a law firm called Venture Law Group. I was an M and A associate. Some of the early deals I worked on were representing Oracle and Intel and other major Silicon Valley heavyweights. And then I was doing M and A for Yahoo. I actually worked on Yahoo's acquisition of Broadcast.com, which mark Cuban's company and GeoCities. Some of these names may be ringing some bells for people. This was back in 1999 and 2000 and then eventually moved in house at Yahoo, and I transitioned into licensing and distribution. But over the last 25 years or so, I've been at the edges of M and A working on various deals. When I came out to Woven, I was tasked with setting up a corporate development team from scratch. And that's where you again, really provided some valuable insights and introductions.

I realized you Worked on those high profile deals here this whole time. I introduced people like, hey, you got to talk to George. He's a firefighter turned F and a professional.

Given this is a podcast, sometimes it's those inside stories. Geocities is a well known big acquisition in the, in the early days of the Internet. I think it was $3.5 billion acquisition, but I was the junior associate, so I was the one doing the actual due diligence. Going through all the cardboard boxes. Old school, no digital data room. Like we were literally going through files. And I found the old original certificate incorporation for geocities. And the company's name when it was originally incorporated was Beverly Hills Internet.

Wow.

The founders lived in Beverly Hills and so they said, let's call it Beverly Hills Internet. But that's actually part of M and A. You find a lot of interesting things when you go through the diligence and you actually look, look at the history of a company and it's really easy to just look at where it is today. But to really do effective diligence, you have to understand why it is what it is today and where it came from.

You're going to tell us how you did the firefighter story. I just want to get that out.

It really is my relationship with Japan. I first came to Japan in 1987. I was a firefighter and rescue crew chief in the United States Air Force and I was stationed at Misawa Air Base in Aomori Prefecture. I had a very unique operation opportunity because we shared the air force base with the Japanese Air Force and the Runway was a civilian airport. So half of the fire department was Japanese. We didn't have a lot of fires. We didn't have laptops or iPads or iPhones back then. We would sit around and wait for fires. And I thought, let me use this as an opportunity to learn Japanese. So 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. But I've also worked for Yamaha Motor Ventures. I was one of the founding members at Yamaha Motor Ventures. I ran Dell, Japan's consumer business. I ran international business development for Yahoo Japan. I've lived in Japan for over 15 years. But I would actually say, and I think it's really apropos to the M and A discussion. When I was in the fire department, we had two fundamental rules. And the first rule was you don't get to choose when the alarm goes off, which is really relevant to M. And A, you don't really often get to choose when the company's gonna go up for sale or when an opportunity is gonna come your way. So you have to be ready to respond, all hands on deck. And sometimes, you know, it's a company may be running out of money, it's a rush, but other times it's competitive, and that's what creates the rush. If you really want to acquire the company, you have to be ready to put in an offer because they may already have an offer in hand or there's other suitors circling. So first rule, you don't get to choose when the alarm goes off. The second rule is you don't go home until the fire is out. And that's also true with M and A. M and A is not just a transaction that you close because first you sign the loi, then you go into diligence, then you sign the merger agreement, and then there's a period of time until closing, and then there's integration. The process may be a year or even two years in some cases, depending on the level of integration. And same thing, you have to be there throughout the life cycle of the transaction. Some people may come and go from the transaction, but somebody also has to be there from the beginning to the end. I think they're really appropriate to M and A as a practice.

I like that. I have my notes about when you run out of water, you start throwing dirt.

That's the other one. So the one thing you learn in M and A, and this is also true, and this was not really a rule, but it was kind of a philosophy. Your job is to put the fire out. When you're a firefighter, if you run out of water, you start throwing dirt. And it was kind of a joke, but it's also a reality. You can put a fire out with dirt. If you put enough dirt on it, you pile it on. It's not efficient, it's harder to deploy, but it works. And you often find in M and A, you can't anticipate what's going to happen down the road, particularly during the negotiations, during the diligence, during the integration. You have to be prepared to adapt, and you have to be prepared to shift gears quickly. You can't just throw your hands up and walk away. You bought this company, you've committed to buy it, and then you've bought it. You gotta do whatever it takes to get it on the right track. And so that's also another lesson I brought from firefighting to M and A.

Love the Parallels from firefighting to M.

And A, Here it is firefighting. Anyone who's done M and A, even if you've done one deal, there's always fires. Oh, yeah, they may be spot fires, but sometimes a spot fire becomes a forest fire because you didn't appreciate how big of it is. Ah, that looks like it's manageable. Then you call them the attorneys and they're like, whoa, wait a second. And particularly when you start doing cross border deals and you start looking at taxes and regulatory regimes, and sometimes there's just challenges you could not have anticipated.

How did Woven By Toyota get started?

Woven By Toyota actually originally was called Toyota Research Institute Advanced Development and not to be confused with Toyota Research Institute. If we go back in 2016, Toyota launched Toyota Research Institute in Silicon Valley as an advanced R and D center. The founding CTO was James Kufner. Now they were doing autonomous vehicle technology, material science, automation, robotics, but it was all advanced R and D. But James realized that there wasn't an organization within Toyota that could take that advanced R and D and productize it and actually put it into Toyota vehicles. We recognized that there was a gap and that was the birth of Toyota Research Institute Advanced Development. The idea that we would take that technology, productize it, and put it into Toyota vehicles. But along the way, it was apparent that there were other opportunities that we could leverage that technology for. And that's what we eventually transitioned into. And where we are today with Woven By Toyota, where we're really looking at the technologies that we can develop for Toyota to take it and transform it into a mobility company. Not just be an automobile manufacturer, but a true mobility company.

The Woven Planet project, that's part of.

That Toyota Research Institute Advanced Development originally became Woven Planet, and then Woven Planet rebranded earlier this year as Woven By Toyota.

This is a fascinating project. Can you tell us a little bit about it? Because a lot of people don't know about it. I'm always like, go Google it, Go look it up. But rather hear it straight from you.

Yeah, I think even if you Google it, yeah, you're not going to really be able to connect the dots, so to speak. But when Woven Planet was formed, the idea was that Woven Planet would be an operating company. We also recognized that we simply could not hire the talent that we needed at the pace that we needed in order to develop the technologies we wanted to deploy. And we knew that M and A was the only way to fill that gap. So in 2020, right in the middle of COVID I went to the Toyota Motor board of Directors and made a proposal to set up a corporate development team to get an allocation and a budget to basically go out and 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 for Toyota has shifted somewhat. And that's why we had a rebranding at the beginning of this year. But in 2021 and 2022, we did 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 a Lyft with offices in Palo Alto and London. We acquired Carmera, which was a startup with offices in Seattle and Brooklyn, New York. And then we acquired Renovo, which was a startup with offices in Silicon Valley.

What goes into pitching a strategy like that? Wait, let's back up a little bit. 2020, we obviously have some big, ambitious goals. We're looking to build a whole division with AI talent. What does that look like? How do you formulate that and pitch it and.

Yeah, I wish I could show you. I unfortunately, I don't have the slide here in front of me, but there was what we call the money slide in that presentation. And it was really a chart that showed the headcount that we needed. The headcount we had, the headcount that we could achieve through our current hiring pace and the headcount we knew we were going to need in the future. And there was a huge gap between where we were through hiring and where we needed to be. And there was only one way to fill that gap, and that would be through acquisitions.

Wow. That was a pretty straightforward pitch.

It really was. And it was all data driven. It was very clear. We knew what our hiring velocity was, and we even knew that before COVID Covid created some challenges, but it didn't fundamentally change the velocity of our hiring. This was back in 2020, 2021, before the market really took a downturn and there was still a lot of investment and activity in the autonomous vehicle space. And we knew that to be competitive, we had to be able to acquire.

Now, building that strategy, pitching it, getting it sponsored. This is completely different than the venture arm.

Yeah. And so I have two teams. I have a corporate development team that's part of Woven by Toyota, and then I have a separate team that is Woven Capital. But Woven Capital is your traditional Delaware limited partnership. It's a $800 million venture fund. It's self funded through its management fees. But it doesn't do acquisitions. It's not a private equity fund. It's a very traditional venture capital fund.

Can you tell me about the strategy that emerged behind that?

That's actually tied to the transformation from Toyota Research Institute advanced development into Woven Planet. We also recognize that as Woven became an operating company, we didn't have the technology and the know how to necessarily get to where we wanted in the timeframe that we wanted. And we knew that we were gonna need to bring later stage companies to the table to help us accelerate into the market. In other words, like a really early stage startup, like a series A company or a seed company, they're not really in the position to actually collaborate with us and scale our business. They might be able to do a proof of concept or some joint development, but we actually needed partners that could help us actually scale our business. And so the thinking was, let's write later stage investments in more mature companies that actually are big enough and mature enough and capable enough of working with us. But with Woven Planets transition into Woven by Toyota, we also transitioned in from supporting Woven from an investment perspective to now supporting Toyota on a global basis for all of its growth Stage needs.

The main drivers would be access to technology and then potentially technology markets, know how and people.

Because when you partner with somebody, they're bringing their people to the table. They may be employees of that company. Unlike an acquisition, they're not becoming part of our company. But through a. It could be a joint development agreement, it could be through a partnership agreement, a commercial agreement, we're able to access that talent, know how and leverage it for us.

How big are these two teams right now?

Corporate development is two. We unfortunately lost a few people through the reorganization. The former head of the group is now the chief of staff for our new cto. And one of our members who was on the integration team moved over to global operations to help with project management. But we're actually in the process of proposing a bigger program and platform for Toyota globally.

Wow. And then the capital side, Woven Capital's.

15 people right now, with plans to hire another seven or eight over the next year.

You built these teams out from scratch?

Yeah, I was employee number one at the start.

Walk me through that. What goes into making that happen successfully?

Wow. I don't know where to start with that. It's knowing people like you and being able to get introductions to the right people. In fact, my current corporate development lead, a gentleman named Alex, Alex Baum, he actually came with Justin Trudell, whom you introduced, and they were contractors in the beginning. But through that relationship, they helped me create the presentation and the materials that we presented to the Toyota Motor board of directors, literally. And like within 48 hours after getting approval from the board, the Lyft Level 5 acquisition came up. And so we had to immediately pivot into, okay, now we're a deal team. And actually the original consulting agreement didn't, didn't contemplate that. So we had to amend the statement of work and shift gears from, okay, let's build a strategy and a plan to let's execute on this deal. So when we launched that deal, I literally had no employees. I had two contractors, Justin Trudell and Alex Baum. But I really got to know Alex through that process and eventually we asked him to join the team as an employee and he relocated to Japan. And I believe he'll be speaking with you later today.

Okay, so the network is a key thing because I. Oh, absolutely.

Let me back up because you introduced me to Justin. Justin brought Alex to the table, who's now the corporate development lead of the team. But more importantly, when we did the Lyft Level 5 acquisition, it was really a carve out from a publicly traded company and it didn't come with any back office. It was just engineers essentially. So no finance, legal, hr, that type of team, which meant we had to be ready to ingest those people and support them. And was through Justin, he had existing relationships with kpmg. We actually very quickly looked at several firms to help us with the due diligence, the technical diligence. But then we actually ended up hiring many of them to serve as interim hr, interim communications, because we didn't have a team on the ground in North America or London to actually support those people that were about to become employees. We had to hire attorneys not only in the US but in the UK. We had to go through CFIUS. At one point, the deal team was over 250 people, when you add all the different contractors and specialists, and I would say probably 70 or 80% of them came through Justin through his network. Because Justin actually had a business of helping firms stand up corporate development teams. And I believe at the time he had helped various private equity firms stand up their teams. And I think he had done six or seven of those. And so he had a very broad network of attorneys, communications experts, HR experts, management consulting firms. So yeah, it was all network and it started with you.

Thanks, I'm flattered. Any other key things? I think there's a lot more than the network. You get the people Then there's lining them and the leadership behind it.

The other part. And again, because when we launched this, we didn't have our own dedicated team. So we built that over the time. While we were doing that, we eventually got the Corp dev team up to five people, and that was part of it as well. Not only were we leveraging outside third parties, but we were trying to hire our own team, make that internal transition. At one point, we had three deals all running in parallel. Lift Level 5, Core, Carmera and Renovo. And they all closed within one month of each other in July, August and September of 2021. It was a heavy lift. I won't downplay it. The thing I liken it to is it's actually a quote that I have to attribute to Reid 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 these people that we were about to acquire or bring on board from scratch. Everything legal, finance, hr. I do have to tell one funny story. I'll never forget the day the Lyft deal closed. One of the engineers came to me and they knew I was an attorney by training. And they came to me and they said, hey, do we have a form NDA? And I thought, we have a Japanese one, but we don't have one under California law. So I said, let me contact our attorneys. We were using DLA Piper as the transaction attorneys, and I got DLA Piper to create an NDA for us using California law. And I gave it to the engineer, and I said, here, you can use this. And then he said, that's great. Who's authorized to sign it? And we're like, okay, we're gonna have to do a board resolution to appoint officers. We really literally were doing everything from scratch. It's hard for some people to maybe really wrap their heads around that. That was literally what we were doing. And our hr, legal and finance teams were all in Japan, and some of them had zero M&A experience, limited English experience. And so we just. We had to figure it out. Firefighting terminology, like, if you run out of water, throw dirt, you gotta get it done. We have to support these employees. We have to make sure their integration is as smooth as possible and provide them the resources that they need to be able to do their jobs.

It's gotta be some interesting lessons learned. Like, this is really unique for an organization to do this on the international level. What were the big lessons learned? The Whole aspect of carve out doing this. All folks that their first time doing it.

The biggest lesson I learned learned was really around the importance of having people with the experience. You can be a lifelong HR person or you could be a lifelong finance person or a lifelong legal person. But if you've never done M and A, you don't really truly understand and appreciate the intricacies and the challenges, particularly when you're doing cross border. When we look at Woven Planet at the time when it was originally created as T R I A D, it was a domestic Japanese corporation. We had a lot of foreigners on the team, but the back office was all here in Japan. They weren't hired because they had M and A experience. They in many cases didn't have international experience. That wasn't part of the job description. They were hired to be the back office for a domestic Japanese corporation. And now we're trying to buy a company with teams in the US and the UK which are different. And what complicated it in some ways. I'll never forget this. This is another thing you may remember. During COVID everyone became remote. While Lyft Level 5 had an office in Palo Alto. Very few people, if any, were actually going into the office. The team was spread out In, I think, 26 states and six or seven countries. They were all working remotely. And we had to consider all of the laws and regulations and like, how do we make sure that we're not falling afoul of different laws and employment regulations in all these different states. Our HR team here in Japan, they didn't have experience with US Laws, let alone each state's laws. The one thing I really recognize is that before you commit to a deal, you really do need to have some basic foundational skill and expertise on the team. Like I said, we ended up using a lot of contractors and they did a great job. But they're no replacement for your own team because at some point they transition off and they hand it off to the business. In many cases, these were new people that we had to hire and they don't come with the transaction history. They don't understand the details and intricacies of why we're doing things the way we're doing them. It would have been much better if we had that infrastructure in place when we did the deal, because that institutional knowledge and history would have remained after the integration was done.

It sounded like the contractors with experiences are essentially a band aid to get the early deals going. And then after you started getting some reps in, you're building that Experience in house and really having more of that organic capacity.

The contractors all did a fantastic job, but again, they transition off at some point. When you're dealing with integration, you want continuity, you want institutional history and knowledge because they know where things are, why they were done the way they were done. And in some cases you do things temporarily. You know, that's a temporary fix and you're going to change it. But if the person who knows it's temporary leaves and then somebody else is, oh, that's how we're doing it. No, that's not how we're doing it. We just did that because we had no choice. We now need to clean it up or fix it. So it's not a criticism or critique of anyone. It's really a reflection of going back to what I said. M and A is firefighting. You wouldn't want to run into a burning building if the people had never been in a burning building before. You want them to at least have some basic knowledge of the regulatory regime, the tax consequences, the HR requirements, the people, the cultures. We were dealing with onboarding people from three geographic regions. We were Japanese company ingesting people from the US and the uk. Our HR team in Japan didn't have experience dealing with US visas. It just wasn't part of their job description or their day to day requirements. Again, that's where really making sure you've got the talent in house before you make the commitment is probably the biggest learning for me.

After five acquisitions, did the strategy change much?

The strategy changed mostly because Woven strategy changed. Like I said, Woven went from Woven Planet to Woven by Toyota. We really doubled down and focused on supporting Toyota in terms of delivering the things that Toyota needs. You may also recall that earlier this year, and so our transition happened right at the same time too, is that Akio Toyoda, who was formerly the chairman and CEO of Toyota, he recognized that Toyota needed to trans. You know, our parent essentially needed to transition and he stepped back from the CEO position. He's still the chairman, but he appointed a new CEO, Koji Sato, who came from Lexus. The next, basically the next generation of leadership. And Koji Sato came in and that brought a new cfo, a new cto, new executives and a new organizational structure which you typically see when you have a CEO change. And that set in motion the transformation of Toyota which then had follow on effects for Woven. Yes, it's really a reflection of Toyota's strategy has changed and so our strategy has evolved to align with their strategy.

You're still building autonomous city oh, you mean Woven City. Yeah.

Yes, we are. It's on track, Daisuke. Toyota runs that. It's a project that's actually run here within Woven by Toyota. I believe by the end of next year, they're going to have phase one with people starting to move in.

Wow.

Yeah.

Maybe tell a little bit about it. This is actually a really cool project.

So Woven City is a test track for mobility. When you think about mobility is not just cars, it's every step in the process. But we think of mobility in a more holistic sense. It's not just a person going from point A to point B. It could be goods, it could be information. When this podcast goes live, it's going to be digitally streamed through various platforms, and people will then download it or stream it and listen to it. And that's a form of mobility. Humans are essentially mobile creatures. Mobility is part of the human experience. Everyone listening to this podcast moved in some form today. Or if you just think of what did you have for breakfast, how did that food get to your house? Or how did you get to the restaurant, and how did the food get to the restaurant? All the different steps in that process. And so it's very difficult to innovate sometimes within the existing infrastructure. So one of the things you want to be able to do is if we were to design this from the beginning and from the ground up, how might we do that, and how do we test some of these technologies? We actually think of Woven City as a test track for mobility, and it's a living laboratory. The idea being that you'll constantly iterate. You'll test and see what works, what doesn't, and then you can evolve and you can continue to test. So it's land that's owned by Toyota, it's a former factory site because it's private land and owned by Toyota. It gives us a lot of flexibility. But people will actually live in the city. We'll have senior citizens, we'll have families, we'll have single people and kids to really to try to test those different forms of mobility and technologies.

One of the things I read was that they include people with impairments and developing technology for that.

Absolutely. That is the goal. Again, it's actually a fundamental mission of Toyota is mobility for all. We don't want to leave anyone behind. We want to make sure that we're creating mobility solutions for everyone, whether it's the disabled, the elderly, the young, the professional, the business person. It's not just personally owned vehicles, but it's fleets, it's Transportation, it's data and information. So when we think of mobility, we think of people, goods and information. And frankly, when we think about the direction technology is taking with cars, you hear this analogy often that a car today is like an iPhone with wheels. It's mostly software. The amount of software is only going to increase over time. But it's not just software in the vehicle, it's connected to the Internet, which gives it access to data and information. And some of the information that it's collecting, gathering as it's moving down the road may be processed at the edge on the vehicle, but some of it may go up to the cloud and be processed in the cloud. And that's the goal, I believe, of all the auto OEMs is how do we build that infrastructure and that technology so that we can constantly be improving the experience for our customers and our end users. But also, as I said earlier, we want to make the safest, most intelligent human centric mobility. At the end of the day, it's about the person in the middle of it. It's not just the, the vehicle, but it's creating delight for people so that they can fulfill their personal needs. Whether that's going to school, going to work, going to the doctor, just going for a drive, traveling, seeing the world, whatever it might be, whatever gives you delight. We want to be able to empower and enable that.

Exciting. I'm looking forward to doing the sequel, this interview at Woven City. When phase one's ready. I got two things I want to touch on. One is culture differences and I'm doing a few interviews. I'm going to talk to your colleague Alex about cultural differences. And I've got another gentleman from Nissan, but I'd love to hear it from the leadership part of it specifically like dealing with the board and those things. And there's things that you hear of, things move slower and that sort of culture around, getting real consensus before things move forward. I'd love to hear from your experience around, what's that been like?

Yeah, I have a point of view. I've lived here for over 15 years. I was here in the Air Force. I worked for Dell Japan, Yahoo Japan, Yamaha Motor Ventures, Woven by Toyota. Lots of different experiences, different types of companies. When I first came to Japan, the way it was explained to me and I've come to find that this is true, this is what I believe is it's really around the decision making process in the west, and that's a broad term. But in the west, generally speaking, we like to extol the Virtues of the strong CEO who just says, you know what we're going to do? X Sometimes the team is caught off guard. The CEOs like, we're going to go do that and go figure it out. So quick decision, can we look at that person and say, that's a visionary leader. They just made that quick decision. But the team is sometimes like, how do we do this? We don't know. We haven't given it any thought. You didn't give us any time to prepare. And so they then have to spend a lot of time, okay, how do we actually execute on this? And the execution may take a long time. The decision making process in Japan, from my experience and I again, I believe this to be true, is the exact opposite. You start by consulting with everyone. You go around and you talk to legal, you talk to hr, you talk to facilities, you talk to the regulators, you talk to everyone and say, this is what we're thinking of doing. If we do this, how's it going to impact you? What are you going to need? You get everyone's consensus and it sounds like it's a time consuming process, but by the time everyone's on board, the decision is actually really simple because everyone knows what they need to do. So the execution doesn't take as long. So it's really a question of how long does it take to make the decision and how long does it take to execute. You still get to market just as quickly. It's just, it looks like the Western decision maker, oh wow, that was great. But they don't actually roll it out and deploy it any faster necessarily. So I think that's one big difference. But there's a lot of advantages to it because you, you identify the challenges upfront. In fact, one of the things that we do here in many meetings, we do it with board meetings, we do it with Woven Capital's investment committee and we do it in a lot of different scenarios where we have what are called gzen meetings. GZEN literally means pre meeting. And you'll meet with, let's say each board member one on one and you'll say, look, we're thinking of bringing this resolution to the board meeting. What are your questions? What are your potential objections? So that when you actually come to the board, you know everybody's potential objections, concerns or what they like. And then you can make sure you address those in the board meeting. It's a much more efficient meeting. And then you can get to consensus faster because you've already talked to everybody. To the outsider, it may look like, it takes more time, but I think it's actually more efficient than throwing an idea into a board meeting and then somebody says something and then the whole discussion goes off the rails because nobody was prepared and nobody really knew what was going to be discussed beforehand. So that's one thing when it comes to the decision making process. The other thing that is a challenge at times is sometimes in our meetings, depending on who's attending the meetings, we have to have simultaneous interpretation. That can be a challenge if the interpreters are not familiar with the vocabulary and the technology that you're talking about. So often what we have to do is we have to submit materials to them in advance so that they can make sure they understand the gist of the discussion. Sometimes we even submit scripts to them so they know what we're going to say. But that also means that in the meeting, sometimes it looks like we're reading a script because we actually may be reading a script. Because if you deviate, you can lose the interpreters and it may not be tracking to the materials you've already shared. So you have to be really thoughtful about what do you put in the materials and how do you present it. And that's probably the bigger challenge is simultaneous interpretation is really difficult if you're not used to it. In fact, sometimes some of the new team members, they speak so fast that the interpreters can't keep up and at some point they miss things because they have to skip ahead or they'll just completely fall behind. And actually, if you sat in a meeting, I'm maybe a typical American, we're speaking both our native languages and we're speaking English. But if I was in a board meeting, for example, I would be speaking like this and I would be talking very slowly, very monotone. You would notice it. You'd be like, wow, George. But it's all about understanding. At the end of the day, if they understand the message, they're very thoughtful, very intelligent. What it really comes down to is you have to be willing to be humble and change the way you present the material and the way you pitch.

You're being mindful. I know you got a hard stop. I know how they are about time here in Japan. But before I let you go, I got to ask you, what's the craziest thing you've seen in M and A?

I think the craziest thing I ever saw was when there was a discussion around compensation and there was just a clear disconnect between the acquirer's HR team and the acquiree's HR team. And without going into details, it was around how big the stock option grants should be and they were valuing it at the face value of the option, but only 25% vests per year. And they were like, no, you need to give that value every year. So you literally had to quadruple the stock option grant to hit the number that the acquired company required in order to agree to the deal. And again, it was just a lack of experience, not understanding how to do M and A and how to think about stock option grants and the vesting.

Schedule and things like that, expectations and especially when you don't have experience in the deal. George, it's been awesome.

Yeah, likewise. And I do want to end by thanking you again for the introduction to Justin Trudell. And actually just I know we've had on and off conversations over the last couple years, so I really appreciate the support and the guidance. And I read your book too. You sent me a copy of your book a couple of years ago and I read that and I've recommended it to other people as well. I wish you the best of luck.

Hey, it's just beginning. It sounds like you're just getting started, so I'm looking forward to continue collaboration. George, likewise. Again, I know you got a lot going on, so thanks so much for taking the time to have this conversation.

Yeah, thank you. My pleasure.

Joining me today is Alex Baum, corporate development lead at Woven by Toyota. Alex, how are you doing today?

I'm doing well, thanks for asking. How are you?

Hey, I'm doing great. I talked to your colleague George earlier, had a fun conversation about the things that you're up to, but you got a bit of a different story. I get the narrative in terms of how things started and the view from the top, but what I want to hear is from your perspective as more boots on the ground being firsthand seeing the chaos. But you have a personal story. Born and raised in the US and you spent this past year here in Tokyo working on M and A deals. I'd love to hear more about that experience and just expand into what it's been like, learning the culture and the differences and things for others that may go through it and what they can learn from your experience.

Thanks for that. Been with the company for three and a half years, give or take a month. And I've been here in Tokyo since April of 2022, so about a year and a half. The story there is when I first joined, There was no U.S. operations. We actually expanded primarily inorganically into the U.S. i started as a contractor and by the time I decided to join full time, it was peak Covid and the border was closed. The border was closed for about a year and a half. I started as a contractor in August and then that, let's say January. I signed my employment agreement and they said probably three months you'll be able to get over to Tokyo. It took a year and three months. So it was the next April, not the current April. That was interesting. I gave up my apartment in New York City. I traveled a little bit. I spent a couple months at my parents house, a couple of months in different cities. But also from the perspective of knowing nothing about Japanese culture, I did get the opportunity to work day in, day out on urgent, time sensitive, very complicated things with many members of the team. I eased into it a little bit. I had a year and a half of learning a lot about Japanese culture from a work perspective and working with my Japanese colleagues every day 24, seven. That was helpful. I moved out here last April. It was, I found, probably the fastest in my life I've been able to make friends and find community. And I love it here. It's super clean, the food's delicious. It's a really good quality of life. Everybody's kind, it's really safe. You leave your book bag somewhere in New York, you go right back to get it. Here you could go get in the morning, it's still going to be there. It's been a great experience. There's definitely challenges being someone who comes from a western background, you know, New York investment banker and fitting it in a culture that's a little bit different from a work perspective and how they make decisions. But here for the challenge, early on it started remote.

You've had some colleagues and I'm curious what were some of the things you started interpreting early on as cultural differences from that experience?

My first remit was to get a budget policy and process approved as a contractor to do M and A. And I believe George will tell you this as well. Within 48 hours of getting that done, we had a live deal. And for me, the first thing I noticed was the uncertainty avoidance. Right. We were working with a team that had never done M and A before. We were doing a large complex acquisition and there was just someone who is at Toyota. So 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 have a very safe job. The culture here is not to let people go. You do a good job and you continue to advance through the company. And this was seen as a huge risk to a lot of my colleagues. And it took a lot of effort because we had nothing when we first started. And it's like, Japanese generally don't work without a policy, a process, a procedure, a playbook. And we had none of that. And so we had to build that as we were going and give guardrails to people so that they could do their job. And they were very hesitant to just jump in. But I think that would be generally the case without having that experience in the background. But it was much more here for me. We were put in a lot of situations where you have just enough resources to get it done, so you just sometimes have to make decisions. And for me, what I found was like, okay, folks aren't going to do that. What my process would be is like, get the executive person or the. Or the person in charge to give you that top down, always top down, and then from there you can go make decisions quickly. And so we were kind of 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 witness that tension was fun in a way.

Wow. So it was actually really unique in that regard, that it was more about you trying to help your colleagues manage the situation and then certainty, as opposed to you sort of conforming to it.

Well, it's come full circle. More recently, I have a lot more experience working in what I would call more traditional Japanese environment and getting things done by, like, collective support, I think, is how you could surprise it right here. To get something done, you have to have all of the decision makers and then all of the stakeholders get their input, make sure things are flush. Like, when a decision is made, you're expected to know from A to Z how it's going to go. And then it's like a domino. Getting to the decision is the hard part. Once you get the decision, like, the whole entire structure is done. Generally, my experience has been in the U.S. it's like you make the decision first and then you figure out how to do it. And so when we first started, we made a decision and then we figured it out, which was more Western. And I saw some of the challenges with that and gained some appreciation for the way the Japanese do things. And then now I have the opposite. And I also feel the frustration. And so it's. I think, 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. And so it's just managing and finding that middle ground.

Let's take it to coming to Tokyo. Like from the beginning. What was it like moving in? I had to go through learning how the subway system works. And I think that was a fun little journey to get used to. Once you figure it out, it's a piece of cake. But yeah, I've just love to know just getting acclimated in the whole new environment because it's not just the country next door.

We have a really good relocation service. And they were really helpful. And my first day that I came to the office, before I went to the office, I actually met them at my city ward to help file some paperwork. And when the relocation team member that was supporting me found out that I hadn't raided the train before, he actually walked me all the way to the office. He took the train with me and took me to the office and wouldn't take no for an answer. And that was like my first taste of like, how helpful and kind Japanese people can be, which is not something I would have expected. I don't think that's something you would expect as an American that I was like, super grateful and blown away for. And then because I had already known a lot of my Japanese colleagues, but there was a lot of people coming at the same time. There was like an immediate camaraderie. We would all go out together, we'd do dinner, we'd do drinks, we'd do all sorts of fun things. And really wasn't so bad. I'm also kind of an adventurous person just by spirit. And so for me, look a lot of challenges around. There's a lot of paperwork, and I don't even know what I'm reading. And I'm using translate. And I get frustrated. And I've definitely had things not done the best way because I didn't feel like dealing with the paperwork or whatever it might be. At one point, I missed a WI FI payment and I just canceled it instead of trying to figure out how to get it again and paid for the hardware, just things like that. But really, I was. I've been blown away with by how kind and hospitable people are. And it's been a really great experience for me.

Okay, yeah. You got settled in? You got a place, you got. You figured out how to. To and from work?

Yep.

Socially, seems like it. You start meeting folks, got work colleagues and things like that.

And yeah, again, the relocation company handled everything Getting me an apartment. I just had to go look for apartments. And the guy spoke English and even the contract was signed by Woven and I found it to not be that, that difficult. I think if we didn't have the relocation, it would've been a nightmare. I also say I don't know how people did this before cell phones because Google Translate is my savior. But yeah, I've been really fortunate. I came in having worked really hard for a long period of time and was the deal making cycle peaks and valleys. And within around a month of me getting here, we were slow for a few months and I used that opportunity to really explore and make some friends. And yeah, I just really, I would say out of all the moves I've made in my life, this was one of the smoothest, which is really surprising to say, but I think I just was in the right mindset.

How would you contrast it like New York? Because I feel like that's our episode in the US and here you got it in Japan.

Yeah. So the first thing I go back to New York regularly, the reverse culture shock I had was just like, oh crap, I can't make eye contact with people because you don't think about that. Just like walking around in Brooklyn or wherever it might be, you don't make eye contact with people. It's a bad idea. And things like that don't exist here. You don't have to be aware of your surroundings. I don't feel like that. But then it's cleaner, safer, the trains run on time is like the normal things. Most of my friends are expats. I have work colleagues that I have dinner with once in a while. I have drinks with and I consider them my friends. But people that I hang out with on a regular basis are mostly expats. They call it the Japanese Wal. It's a little bit more difficult to make long term Japanese friends. And I think that's probably true getting out there finding like the cool events and things. But it's a huge city. There's you can entertain yourself forever. I've gotten to travel and explore Southeast Asia a little bit. For me, I would say really positive. I love this city. I think it has the best food in the world. It's clean, safe and affordable. So it's really nice. But then I was in New York City for. I grew up in New Jersey, about an hour out of the city. And then I lived in New York City for like seven years. And the people that I was friends with there are like my lifelong friends. And so here I've been here for a year and a half. I've traveled a little bit during that time. I think I've met a couple people that could be that way too. But they're mostly expats. And making them. The deep connections with Japanese people is much harder.

Okay, very interesting.

Especially I don't speak any Japanese really at all. So I'm studying, but it's quite different. Yes, I got very discouraged after about five months.

What were the things that you learned when you actually are working in person in the office, in terms of the difference between the working culture?

The first thing was I had to wear my mask in the office for much, much longer than everybody else in the US did. I'm trying to think of the major differences. We work on such an international team. So the thing that's really interesting about Woven is that, and I don't know that I'm just going to ballpark, I believe that two thirds of employees are international. That's roughly. We're around 2,500 people. I would say around 1500 are international, give or take. And so there's a very large international. It's like a. It's like a melting pot of a company. I don't really love that term, but lack of a better one. And so for me, probably half the team that I work with on a regular basis is Japanese and half is from some other part of the world, whoever may be American or French or Spanish. And it's been easy for me. Woven was designed to be a mix of Silicon Valley and Japan. And there's definitely challenges. We've seen some hard times, we've seen some huge misunderstandings, misaligned expectations. But the work culture that I was born to be afraid of and that I know people that deal with where their working hours are nine to nine every day, and you don't experience it here. It really feels like working in a Silicon Valley company. Now, getting consensus and decision making is different and more challenging. Also, transparently, I'd spent small investment bank, startup, a little bit of time at a big company like this. I find the most challenging thing for me is now, as I've stepped up into the corporate lead role, it's getting the consensus across a bunch of different people and a bunch of different orgs. And in Japan, when a decision is made, you go kind of double click on that. It's like it's a rubber stamp. All the stamps have been collected and then the actual decision is a rubber stamp, or at least that's the ideal. And that is very Challenging, it's time consuming. You have to think in years, not weeks. We're trying to establish a global corporate development platform to take some of the learnings and lessons that we have here across Toyota and we've been working on that for. I've been in this role since April, so that's eight months now and I've gotten a slide or two that I've seen and that's really excited about that. So it's like we're being told in a few more months, as we work a few things out, we can start moving up the chain and talking to people and that's eight months worth of work. And I think that was like what the expectation was. It was like if we're going to go for this, measure it in six month increments, not in. Whereas in the US if you were like, hey, let's go create a global corporate development platform and you hadn't seen progress in three months, you'd probably scrap it. Yeah, I mean I found stuff to do, other ways to stay busy and contribute and add value, but that kind of like the process being patient and then also communication. So while the work culture here is a blend, there are a lot of colleagues that don't have great English speaking ability or I should say their English isn't incrementally better than my Japanese times a thousand. But you have to speak slowly and use light vocabulary and for someone like me, you can't use fancy M and A terms. The ability to distill your information into bite sized executive level quick hits. Taking these complex ideas, topics, tasks and making it digestible. For someone who's not a native English speaker on first go and getting them to actually read it and retain it is probably the biggest challenge that I have. It's been a great opportunity to learn. The Japanese have a term that I was networking and having lunch with a guy and who also lived in New Jersey for a while. It's no bashiro and it means to stretch oneself. So that is like how I've seen this experience. Yeah, it's no bashiro.

Can we break down the rubber stamp approval? It sounds like you, you need to identify all these different stakeholders and then get their buy in individually. And then once you do that, you can actually formally get a firm. Does that sound right?

Yeah, it's interesting. That is correct. So you should have all of the key stakeholders and then all of the processes level people like yes, this would work and yes, the stakeholders are aligned. There's a balance. There's like this push and pull Though, because it's a lot easier to get things done if you have the top person, the executives, decision makers on your side. And what I find is I try to socialize with kind of the senior level people that I have a good relationship with my boss and then try to get top level. Yes, this makes sense. Let's go figure it out and then go and get all the rubber stamps before going back to them because you might also get, hey, you're a junior, how are you going to get this done? And it's a balance of being like a top down culture, but then also needing all the rubber stamps and being here for a year and a half. I think hopefully I'll have more perspective in another year and a half, but I'm still just learning.

That's so fascinating. So you get at least some initial buy in at the top level and then you take that narrative with you to the other stakeholders and said, hey, I'm having a conversation with the big dogs here. We're looking at this thing, but want to understand your perspective. Want to understand how this impacts you.

Exactly.

And then get onto it. If they have some big objection, you'll hear it out. Then you work on addressing that. You go around the next stakeholder. This is why it takes so long and I don't have patience for this. So given fundamentally that's how this works. How do you balance this? When we're looking at doing these deals between the Japanese culture and the American culture where like you just described earlier, we want to get things done, we make the decision, let's go.

Yeah, the cultural relationships between. The first thing that we did was when we started making acquisitions, we, we let people operate as is. We didn't go in immediately. There's a reputation that I've heard other people talk about for Japanese acquirers to go in and say, no, this is how we do business. We did not do that. We said, you're going to continue to run your business. The engineers are going to get to know each other over the first six months. We're going to figure out how we're going to work together. That had its pros and cons. Pros. We didn't create a ton of frustration and stifle the business. And we've been able to have pretty good attrition metrics and so I'm proud of that cons. There wasn't as much strategy alignment in the beginning. There's a definite balance there. And for us, we have okrs. We want to know what the acquisition, what that is going to be working on. And then we want to give them some freedom to slowly integrate over time. And so I think that's the key. And then pace of decision making, I think can be frustrating for people. It can be frustrating for myself. But when you do have the alignment and you know what the objective is, everything just goes boom, boom, boom, boom, boom. And so once you have that alignment, and ideally by the time we acquire the company, we have that alignment, things actually move really quickly and decisions get made really quickly, which is, I think, super efficient and really cool to see. You have to see it, I think, first. But when you see how long it takes, but then, and it can be more challenging from an American perspective, it can be frustrating. But then when the lever flips, it's cool. And you say, okay, I understand why they do that.

It's just like polar opposite of how things are done in the US Part of me is like, is there like a hybrid? I get it. I think that's really cool that you get that level of alignment because then you don't run into those friction points that we typically have that, hey, here's stakeholders that are misaligned and how do you deal with that? And all those people issues. But the speed, you're sacrificing a lot of speed. I don't know. There's a way to combine it.

So we have moved pretty fast here in terms of the middle ground. This is it. And there's a push and pull. Some of the stuff we're trying to work on right now isn't priority. We're trying to hit objectives, we're trying to go into vehicles. Me trying to create a corporate development platform for Toyota isn't everyone's number one priority. And I have to be respectful. But when the decision was we need to accelerate, we're behind, we want to deploy capital. It took us three months to get a billion dollar budget approved. And then we went and over the course of a year and a half, we did five deals. And for really any corporate that doesn't have a long M and A experience, that is very fast. I tell people all the time, a lot of times you build a core dev team, you don't get a deal done in the first year because you have to build out everything. When the decision is made, the company can move pretty quickly. And those are a lot of decisions that were made quick. So I think this is the experiment, this is the attempt to find the middle ground. And it's fun to be here and see it happen.

Great experience. What's the craziest thing you've seen in M and A.

So the craziest thing I've seen in M and A was it's been a while since this happened. I think it was the exact same day that the wires were supposed to be transferred. I got a call. It must have been 6:30 in the morning. Hey Alex, are you planning on coming into the office today? Yeah, what's going on? Okay, I need you to be at the client's office. Go there now. I'll send you an email. Essentially they had contracts with a lot of the leading, like a lot of real estate buildings in New York City to have equipment in their building, on their building, whatever it might be. None of those contracts were signed. They were handshake and Christmas gifts. So they get big relationships in this case in the Jewish community. And all the equipment was just like there was a contract, agreement of terms. Nothing was signed. It was all handshake. And he'd send him a Christmas gift every year to keep them happy. We had to create a stack of. I went through the data room, I said these are the contracts that aren't signed. And every couple hours as the day would go on, hey Alex, how are we going? There's the founder and the chairman making phone calls, getting them all done. It took us three days, so it was just delayed.

It awesome. That's such a crazy story. Hey, those of you still with us, until next time, here's to the deal. Foreign thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan K I S O N or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Foreign Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.