Like buses, you can wait years for a specific corporate venturing-backed fund to promote a specific technology platform before three come along in a relatively short space of time.
This past week’s announcement of a $300m fund to promote chipmaker Intel’s next generation of microprocessors to build used for mobile computers called Ultrabooks is the latest. The Intel Capital Ultrabook fund follows the $100m A-fund to support the open-source Android mobile phone operating system and the $250m sFund to help Facebook’s social media platform, all announced in the past 10 months.
Venture capital firm DCM is managing the A-fund, with limited partners including Japan-based games developer Gree and China internet services provider Tencent, while peer Kleiner Perkins Caufield & Byers (KPCB) is running the sFund, in collaboration with e-commerce giant Amazon, Facebook, online games group Zynga, cable companies Comcast and Liberty Media and investment bank Allen & Co.
In March last year, KPCB also said it was doubling the size of its iFund to $200m to promote consumer electronics designer Apple’s products, including the iPad and iPhone, two years after the first $100m had been committed by undisclosed limited partners.
The Ultrabook and Android funds are aimed at competing directly at Apple’s proprietary iOS operating system and products that have over the past five years seen the company’s turnover and profitability increase. Since the transformative launch of the iPhone in 2007, Apple has risen in value to briefly become the world’s most valuable by market capitalisation this week.
By offering cash to invest in developers for the Android operating system and the planned range of Ultrabooks, Apple’s rivals are hoping to ween prospective developers away from focusing just on Apple, just as search engine provider Google’s investment in Zynga has helped lead the games maker away from solely supporting the Facebook platform to now agreeing to develop hits for the new Google+ platform.
The Intel Capital fund, which is entirely funded by the corporate venturing unit’s parent, will be invested over the next three to four years in companies building hardware and software to improve Ultrabooks with longer battery life, innovative designs and increased storage capacity.
By owning the base of the technology stack, Intel can keep control of the security and patents to defend its technology while outsourcing research and development to third parties, which can aid Intel’s stated goal that the Ultrabooks will cost less than $1,000 each even with the basic parts (ie mainly Intel’s chips) costing $475 to $710 depending on the model.
This strategy of owning the intellectual property to the core technology is pitting Intel firmly against Apple, which has seen considerable success using the courts to force manufacturers of mobile products based on the Google-promoted Android operating system, such as HTC and Samsung, to be held up in the roll out of new phones and tablets that compete against the iPhone and iPad.
With all technology providers converging on the acronym SoMoLo (social, mobile and local), successful tactical use of sizable funds to back entrepreneurs could be the difference in winning a large part of the $261bn global computer industry.
That is some bus to hop aboard.