How to Spot the Next Billion-Dollar AI Chip Company Before Everyone Else
Nicholas Sage, president of TDK Ventures, discusses their CVC strategy of investing 4 years before technologies become obvious, focusing on 'impact scalers' who can become market leaders. He emphasizes the correlation between financial and strategic returns, advocating for CVC 3.0 approach over traditional strategic-financial balance.
Summary
Nicholas Sage, president of TDK Ventures, provides insights into deep tech venture capital and corporate venture investing. The conversation begins with rapid-fire questions covering TDK Ventures' approach, including their preference for seed investments, focus on unit economics, and global investment strategy with particular bullishness on India. Sage explains their investment philosophy of identifying 'king of the hill' companies 4 years before they become obvious to the market, avoiding the trap of being either too early (6 years) or too late (2 years) when opportunities are already priced in.
A significant portion discusses specific investments including Grock (LPU technology), Fabric 8 Labs (metal 3D printing), and Nubis (optical interconnects). Sage reveals he invested 15% of the fund in Grock based on CEO Jonathan Ross's comprehensive vision and counterintuitive approach to chip design. The conversation covers TDK Ventures' origin story, sparked during Sage's Stanford Executive Program when he realized TDK excelled at exploitation but lacked exploration capabilities.
Sage introduces the concept of CVC 3.0, arguing that financial and strategic returns are highly correlated rather than requiring balance. He emphasizes the importance of unit economics, equal-win partnerships, and supporting entrepreneurs with a customer mindset. The discussion touches on team building philosophy, learned from an INSEAD exercise showing that diverse 'average' teams outperform expert teams. Sage concludes by stressing the vital role of entrepreneurs in building a better future and the VC's responsibility to support them effectively.
Key Insights
- Sage argues that successful venture capital in deep tech requires being right exactly 4 years before technologies become obvious - 6 years is too early and causes startup death from lack of funding, while 2 years means opportunities are already priced in
- Sage invested 15% of TDK Ventures' fund in Grock based on CEO Jonathan Ross's counterintuitive approach of spending the first 6 months designing the compiler before the chip, which enables superior performance on older 14nm technology
- Sage explains that CVC 3.0 recognizes financial and strategic returns as highly correlated rather than requiring balance - if all portfolio companies fail, both financial and strategic value approach zero, while massive successes create both exceptional returns and strategic partnerships
- Sage describes how team building should prioritize diverse 'average' performers over experts, based on an INSEAD exercise where teams of average people outperformed expert teams because they could challenge each other effectively without ego conflicts
- Sage reveals TDK Ventures conducts annual NPS surveys asking portfolio companies three questions including likelihood to recommend to other entrepreneurs, leading to systematic improvements during week-long reflection sessions
Topics
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