Wendell Brooks, the incoming head of corporate venturing unit Intel Capital, said the move by the group to change its compensation from a carried interest-like structure to more bonus-based terms last year, “was probably bad timing.”
Market sources have told Global Corporate Venturing the changes to compensation had been part of departees’ decision to leave, along with the transition in leadership at the group.
The group undertook a shift in compensation last year, with Intel Capital until recently having been one of the few corporate venture capital organisations to offer a form of performance fees, called carried interest, based on the profitability of its deals, which is typical in the wider venture capital world, although not in corporate venturing. This carry has been replaced by a form of bonus.
The changes to compensation came only months ahead of Brooks taking over at the head of the corporate venturing unit. Brooks, who was speaking in a press interview on the side of the group’s annual 1100 person conference Intel Capital’s Global Summit, said: “The changes to Intel Capital’s compensation system happened before I came on board.” He added: “These changes brought more subjectivity as opposed to objectivity into the payment scheme.”
Brooks said due to the transition from former leader Arvind Sodhani, who is retiring, to him, there was natural “uncertainty” as executives “do not know what the future holds” in such situations.
Brooks said: “It was probably bad timing from all of us to put the new comp scheme in place” ahead of the leadership change at the group. However, Brooks added Intel Capital’s new scheme is also “a competitive pay scheme focused on retention,” so the group “viewed it as a compliment” when it lost carefully picked staff, although it “hated” when it happened. However, he downplayed the magnitude of any flux saying it had been roughly 10% in the last year.
The group is on the verge of investing more than $500m in start-ups this year, Intel Capital said today, while it has also secured 22 exits this year.
However, despite such success, there has been significant change at Intel Capital as it moves into new leadership. Intel Capital has been shrinking its investment team and changing its strategy to focus increasingly on strategic relevance to its parent and larger deals.
Four years ago, when Global Corporate Venturing ran its first full profile in mid-2011, Intel Capital had 79 investors.
The number of investors at Intel Capital has decreased slightly to around 70, with around 70 support staff that help the group manage its multiple corporate relationship, and 38 additional mergers and acquisitions staff.
There has been significant churn among the team. These include executives such as Sean Cunningham leaving to Trident Capital Cybersecurity, Steve Eichenlaub to M-Six, Robert Rueckert to Sorenson Capital, Merav Weinryb to Qualcomm Ventures, Baris Aksoy to form 37 Capital, Dharmesh Thakker to Battery Ventures, and China managing director Richard Hsu, joining Susquehanna International Group (SIG) to head up its new south-east Asia fund, and Chris Pu, in Hsu’s team, has also recently left to join Australia-based phone operator Telstra’s corporate venturing unit, and Christine Wu left last year to become a managing partner at Tendence Capital.
One departed executive said: “The organisation is changing under Brian Krzanich, [CEO since May 2013]. I think there has been a fundamental divergence in how Arvind and Paul [Otellini, Intel CEO until May 2013] view the value of the organisation versus Krzanich.”
In part the group is focused on leading more deals and doing bigger transactions. The departed executive added: “Doing big deals for a corporate is very different from doing venture deals so I think a lot of people are thinking about the new dynamics.”
He added: “With the transition to Wendell, I would wait to see what he envisions for the organisation and if he is able to execute his vision, but it will take time to assess. It is amazing how similar CEO transitions are to government changes!”