Andy Grove, iconic co-founder and former CEO of Intel, at the first Intel Capital CEO Summit back in 2000 said: “The best way you teach people how to manage is how you manage them…. The notion you do one thing and expect others to do something different is a non-starter.”
Two decades on from this speech and it is clear Wendell Brooks, senior vice-president at Intel and president of Intel Capital, is winner of the inaugural Leadership in the Innovation Economy Award.
Nick Washburn, senior managing director at Intel Capital and previous GCV Rising Stars award winner, summed up his approach: “Wendell is the best leader because he delegates and trusts. This delivers a high-performing team and outsized success. Trust, delegation and empowerment from him pervades the team and we trust each other and I’m grateful for the opportunities given to me.”
Trust and delegation also enable Brooks to cover more ground for Intel as he runs mergers and acquisitions (M&A), since 2014 when he joined from investment bank Allan & Company, along with a sports division and the new business development.
Bob Swan, Intel’s CEO, said: “Wendell has transformed Intel Capital by providing clarity of mission and aligned the organisation, systems, and rewards to support that mission. Under his leadership, Intel Capital has evolved to play a combined strategic, financial, and cultural role in Intel’s transformation to unleash the power of data. Wendell’s leadership not only in equity investing, but also in M&A and internal new business incubation, is positioning Intel to grow and succeed in key technology inflection areas such as AI [artificial intelligence], 5G/network transformation, and the intelligent edge. Wendell is one of our fearless leaders who embraces disruption as an opportunity to pursue rather than simply a threat to avoid.”
Achievements
Shorter-term, Brooks’s most eye-catching impact has been M&A transactions, including Nervana, Voke, Altera and Mobileye, but Intel’s many equity investments, smaller acquisitions and collaborations with startups helped set the stage and speed the transition of Intel from a personal computer (PC)-centric to a data-centric business covering AI, 5G, internet of things (IoT), mobility and sports as well as the traditional semiconductor and manufacturing businesses seen under Grove.
Trina Van Pelt, another of the five senior MDs running Intel Capital under Brooks and another previous GCV Rising Stars winner, pointed to autonomous driving startup Mobilieye as indicative of Brooks’s core strengths. She said: “Mobileye is a good example of being able to look globally for opportunities and handle deal complexity.”
Mobileye was incorporated in the Netherlands, was NY-listed and based in Israel for research and development (R&D).
Van Pelt worked on the beginning of the deal as “complex is fun” but Brooks brought to the table the “drive and openness to views” that enabled it to reach a conclusion that only 18 months before had been rejected as “it was tiny and Intel had no strategy to align as it was at an inflexion point,” she added.
The core attraction to a data-centric company is the enormous amounts of information autonomous driving and cars can generate. Nearly 20 years earlier and Intel had reached a similar inflection point through the development of its lower-power Centrino chip out of its Israel-based R&D centres and Intel’s openness to global disruption is reflected in its own origin story, with Grove having been a refugee from Europe.
Van Pelt added: “Wendell wants discussion on strategy as Intel thinks through risks of disruption and the long-term, 10- to 15-year chessboard.
“Wendell has brought different skills to Intel with his deep investment banking experience and work on a lot of transactions after an engineering background. He brings a creativity to possible thinking around acquisitions or equity investing and a vast network, from everyone from Melinda Gates down.
“From a personal point, he loves to hear different points of view and not dictate but listen and recognise to get to a better overall position. It’s been fantastic.
“Intel Capital was [previously] more hierarchical, which can slow down CVC if the head has other responsibilities. So, by having five senior MDs it has speeded things up. I was also at University of Michigan so from a football playbook it has been all about the team, the team, the team. What this means for Intel is thinking about bringing the best team forward on every deal not just one person. By [now] splitting M&A and equity we can ask who the expert is to evaluate and where we add value.
“So if a portfolio company needs to hire a CRO [chief revenue officer] or CEO we don’t hoard our list and can introduce customers or coinvestors.
“With incentives taken care of it has been tremendous to help the organisation’s overall health score and not miss a deal because we are busy.
“Now we can hand off to evaluate and still advance a deal because we are recognised and counted.
“There’s been a handful of examples this [past] year of looking at strategic objectives of business units as equity experts. We can partner as well as invest equity but we don’t do venture deals for a two-times return only. Our focus is one Intel and getting the right outcome by finding the right companies to support the investment thesis wherever it might be. We are close to business units but business development is separate even if we encourage portfolio companies to collaborate with Intel research and help the business units.”
Intel Capital’s storied history – helping portfolio companies
Washburn added: “We have tried many flavours of CVC since starting Intel Capital [ICAP] in 1991 and so the data shows where we add value in 2019.
“For ICAP, the customer is our founders and we offer differentiated capital to grow their business. We are company builders by being seasoned investors with deep domain expertise who work closely with portfolio companies to make introductions. For founders it is like being the kid in a candy store as they can leverage our go-to market and technical expertise from Intel being the world’s greatest engineering company. Our goal is to deliver outsized venture returns, in top decile, by bringing more than dollars and being thesis-driven. Funding is a means to an end and that end is to build companies.”
Certainly, portfolio companies see it this way. Sam Nagar, chief executive at Pixeom, which Siemens acquired in November 2019, for the GCV Rising Stars profile of Elana Lian said: “Elana joined us when our revenue was roughly $1.5m. Her direct contributions help grow our annual revenue grow to $10m and then to $20m. She earned her spot as my most trusted adviser. She was helping us navigate new territory.
“She prioritised and made customer introductions to generate revenue, investor introductions, and she even found a potential acquirer who started [its] M&A diligence and became the catalyst for the acquisition.”
And while the goal is to bring this level of support to all its companies, the task was harder when Intel Capital was doing so many new deals each year.
Washburn said Brooks made the decision to cut its new deals from 70-80 all over the world but with a small stake where it hard to get Intel resources allocated to a more focused portfolio.
He added: “We get better financials when we have bigger ownership and can add more value. So our 310 portfolio companies over the next five years will shrink to mid-200s as natural M&A offsets the fewer new deals.”
This more focused investment strategy has already started to work as Intel Capital’s portfolio was more than 400 back at the start of 2016 when Brooks gave his first speech at the Global Corporate Venturing and Innovation Summit in California. As Brooks added then: “Anybody can provide the capital going in to a company. I think it takes a lot of effort and dedication to help those entrepreneurs find successful exits. And we in this room as corporate venturing people are best equipped particularly relative to a traditional VC to bring that value to fruition in all of our investments.”
Intel still plans about 30 to 40 new deals each year focused on China by its team of four, western Europe (team of three), Israel (four people) and US (about 32 investment partners), while it has cut its investment team by about a quarter and stopped activity in places like Latin America and eastern Europe and Africa.
2019 results
Washburn said in first half of last year Intel Capital led 95% of 21 deals, go on boards and set terms for a greater than 10% stake.
He added: “For the existing portfolio, which is a good portfolio, as it ages we get a strong signal whether a company will reach escape velocity and in those we look to increase our stake.” Washburn gave the example of enterprise AI business DataRobot in its $206m series E round in September.
Intel Capital’s 2019 results through end of September have been impressive with $367m invested in 26 new investments and the same number of follow-on deals. Intel Capital has been lead investor in more than 80% of new deals. On exits, maintaining its strong cash-on-cash returns, Intel Capital has helped 16 portfolio companies with their trade sales or flotations in the first nine months of last year.
This followed a 2018 which had been the best cash on cash exits rate for 10 years, Washburn said (the company no longer tracks internal rates of return (IRR)). And by separating the M&A from equity (Intel Capital) and also from business development in Autumn 2018, Intel Capital has tried to clear up some market confusion about its intentions and fit with the broader company. Washburn said: “The thesis then was a learning exercise to combine all equity, strategic team (BD) and M&A to triangulate growth from R&D to M&A/licensing and BD to equity. But this was a jack of all trades approach and it was clear not to work. Skill sets are different and licensing has a different rapport with founders. Second, there was market confusion. ICAP is not a pipeline for M&A. Intel has bought 24 out of 670 IPO and M&As done from its portfolio since 1991.”
Encouraging discussion, collaboration and diversity
By encouraging discussion and using data to test theses, Brooks has been open to change in execution – such as “hiccups” like announcing a potential large secondaries sale of much of its portfolio – while retaining his strong principles and strategy for success through diversity and inclusion and doing more to make the industry stronger through greater collaboration.
Brooks calls corporate venturing an “unfair advantage” over traditional VCs because they can add more value to entrepreneurs and has called for the industry to do more with each other. We are better, together in the internal mantra and Intel Capital said entrepreneurs can gain even more advantage with “smart syndicates,” leveraging the multiplier effect corporate venture investors can provide.
As well as recognising those with responsibility for corporate development and growth encompassing strategy, venturing and innovation bringing real results in business, the Leadership in the Innovation Economy Award is based on those who also make positive contributions to advance the corporate venturing profession, enhancing credibility and performance for CVC leaders and CVC units. This can include a range of contributions thought leadership, supporting research, developing standards, mentoring, teaching and leading by example.
In his 2018 GCVI Summit speech as he started his two-year term as chairman of the GCV Leadership Society advisory board, Brooks said: “I am blown away by the quality and number of people you have since I was here two years ago and I am committed to be back. It is terrific for forming partnerships and building relationships where we can invest together….
“It is not surprising the venture capital community has not done a terrific job over time of being diverse and inclusive. So we initiated this year [2017] an intern program where we brought five sophomore students from universities into Intel, four of them were African-American, one was Hispanic, three of them were women and we felt very, very good about their experience. We promised them a sophomore year learning about venture capital and be endorsed by Intel Capital and after junior year we will put you in with a portfolio company and let you go experience what it is like to go be with an entrepreneur and at the end of those two years you will have an opportunity to come back to Intel Capital. So we took the approach of we will seed and build the ecosystem so future generations will have naturally those mentors. I challenged the audience at the event to hire one African-American, woman or under-represented minority to an internship program and we will as an audience move the universe.”
Intel Capital has gone beyond this internship program and other work, such as partnering HBCUvc, a nonprofit that trains students at historically black colleges and universities and hispanic-serving institutions, to its own investment team and portfolio companies.
The unit had in 2015 set up a $125m diversity fund, with Van Pelt as co-manager, but she said: “We realised it is not a job for a few but for everybody so the team went from two (Christine [Herron, who subsequently left when the team was cut in late 2018] and I) to 60 and Wendell embraced this. Outcomes improved as we never lower the bar. It is always: does it meet an Intel thesis and offer the financial returns then tick the box of D&I. We have a huge portfolio of more than 300 companies and diversity is not just with the first investment but as the company grows. So does the metric scale with company size as percentage rather than just two to three people? Can we encourage portfolio boards to expand the candidate pool and get stronger candidates even if you do not hire at the end you learn more to shape the role.
Intel has blown past fund target of $125m with $230m invested by 30 September. This year 20% deals by value are D&I and 25% by volume. For new deals even higher at 31% by volume and 23% by value.”
Although Intel Capital generally avoids making limited partner commitments in venture capital funds – as Washburn noted “we see the deals anyway and being two steps removed we cannot add value to portfolio” – the group has made an exception in backing a diversity-focused fund of funds at seed stage to drive more deals into the ecosystem.
Bringing a level playing field through greater openness and common standards improves the chances for all people of talent to make a career in CVC and enables a common language for discussion to improve decision-making.
For his 2018 GCV Powerlist award, Brooks said: “I am honoured to lead Intel Capital, where we create shareholder value, make pathfinding investments for the future of the corporation, influence corporate and business unit strategy, and contribute to social responsibility. We play a critical role in Intel’s growth and the ecosystems we touch by ‘getting paid to learn’.
“The key is adding value to the companies in which we invest while seeing where money is flowing, where new technologies are headed, and where entrepreneurs are trying to innovate. These learnings are shared across Intel to refine our strategies.
“Making money for our shareholders isn’t enough, it is important to be socially responsible and promote diversity and inclusion across our industry.”
Looking forward
As Intel’s spokesman for the latest award said: “At the dawn of a new decade, we stand at a time when the complexity and economics of technical, digital, and business model transformation has never been greater. Entire industries and societies are facing massive challenges and opportunities that cannot be addressed by one corporation alone. More than ever, collaboration across the ecosystem is essential for successful advances in the critical issues of our era, such as climate change, balancing security and privacy, advancing health and curing debilitating disease, bridging a digital and economic divide, re-structuring global infrastructure for transportation (autonomous driving, drones), logistics and supply chains, and enabling new communications capabilities through 5G and IoT with compute at the edge of the network, enabling advances in manufacturing, agriculture, energy, retail, education, healthcare, and beyond.”
The list of challenges and opportunities is long but with Brooks and Swan as the latest generation driving Intel, alongside a revamped board of directors that now includes storied VCs, such as Jim Goetz from Sequoia Capital, the appetite for change and innovation remains strong with perhaps the most iconic Silicon Valley success story.
Data
Intel Capital’s 2019 results through end of September: $367m invested in 26 new investments and the same number of follow-on deals.
Intel Capital has been lead investor in more than 80% of new deals.
On exits, Intel Capital has helped 16 portfolio companies with their trade sales or flotations in the first nine months of 2019.
