There is a couple of useful memes that help people go through business, including the harder the decision the less it matters which you choose and Occam’s razor – that the simplest explanation is usually the correct one.
When it comes to meeting Wendell Brooks, president of Intel Capital, or hearing the clarity of his insights during his first public speech at the Global Corporate Venturing & Innovation summit in Sonoma, California, then the simplest explanation is that he is very good. He is, therefore, ranked second in the Global Corporate Venturing Powerlist 2016.
In his keynote address at the summit, Brooks brought to life how Intel’s strategy under CEO Brian Krzanich was fitting together. This is something in which he has been intimately involved, having made the company’s largest purchase, Altera, last year while head of mergers and acquisitions and before taking on the extra responsibility of corporate venturing this year.
Altera, a $16.7bn deal, was to support Intel’s push into data centres, which is the second-largest division for revenues based on results from the first three months of the year, and growing. Intel has been pushing strategic change, as its biggest division, client computing, offsets falling unit sales through price rises in the wake of the shift from personal computers to mobile.
Brooks joined Intel three years ago after helping sell Intel Media to Verizon as an investment banker at Allen & Co leading its Europe office, having formerly been a technology, media and telecoms (TMT) banker at Citi for nearly 15 years.
When Arvind Sodhani, his predecessor at Intel Capital, was retiring, Brooks said he was approached by Krzanich and Stacy Smith, then chief financial officer, with a view to recombining the M&A and venturing roles, as was the case before he joined the company.
The TMT pedigree helps explain his recognition of how virtual and augmented reality and drones could help shape the world and by rejoining M&A with the world’s most powerful global corporate venture capital platform brings powerful possibilities together. In his blog, Brooks identified how Intel Capital had “invested in more than a dozen different startups to help create the goundbreaking Intel RealSense technology”.
At the summit, Brooks gave a powerful speech that laid out a clear vision of continuity – Intel Capital will continue investing $300m to $500m a year but evolve to lead more deals, from 40% historically to as many as 60% in future, adding more value by taking board seats, refining its processes to be faster and being less “insular”, working more with appropriate partners and always asking “what can we do for our portfolio companies, not what can they do for us?”.
Entrepreneurs are offered relationships with both Intel and its corporate network. For example, Mio Babic, chief executive of iStreamPlanet, a sports streaming company backed by Intel Capital, which was sold to Time Warner last year for a reported $200m, said at the most recent Intel CEO conference that it had secured a key corporate customer from a meeting at one of the group’s technology days – global networking events run by Lee Sessions and an Intel Capital team dedicated to ensuring both entrepreneurs and corporations are securing useful business relationships.
With this approach masterminded by Lee Sessions and copied by VCs and peers, Intel Capital gathers a huge group of startups and corporations, all doing business with Intel. It simultaneously receives the marketing kudos for linking itself and its ecosystem with the technology companies of the future.
If dealflow is the essential element in venture investing, then a position as the entrepreneurs’ supporter and with a long-term pedigree for financial and strategic success seem important requirements. Intel was the largest corporate venturing investor in 2015, with more than 100 deals and more than $500m committed, including investing more than $60m in drone manufacturer Yuneec and leading big rounds for cloud computing company Mirantis ($100m), payment processor iZettle ($67m) and social media management company Sprinklr ($46m).
Indicative of its strategic and financial focus, Intel’s recent venture investments have covered the internet of things, location services, chips, wearables and drones, including FreedomPop, LISNR, Skipio, What3Words, Body Labs, Microprogram Information, Perfant Technology, Chargifi, KMLabs, Prieto Battery and Eyefluence in the final three months of last year.
Intel Capital also had a healthy year for exits, most notably from cloud computing software provider Virtustream, which it backed at series A and B stage, and which EMC agreed in May to buy for $1.2bn.
Another two portfolio companies, cognitive computing platform Saffron and smart eyewear developer ReCon Instruments, were acquired by Intel itself, the latter for $175m. Brooks talked eloquently in a blog about the company’s purchase for a reported $175m of Samsung and Deutsche Telekom-backed Replay Technologies to build its immersive sports category.
This combination of data, analytics and growth segments plays to Intel’s strengths as a chip and server company and its move up the vertical to more value-added opportunities in the way Amazon and Apple have moved beyond their cores of retail and computer hardware respectively.
Intel Capital’s insights and dealflow should provide plenty of support in this corporate parent growth strategy.
This year, perhaps the most promising exit candidates are Sprinklr, big data technology provider Cloudera and e-signature company DocuSign, all of which are unicorns widely seen as IPO candidates in 2016.
And, according to GCV Analytics, Intel has been the most active corporate venturing investor so far in 2016, with deals including backing the $50m series B raised by wireless service provider FreedomPop and a $33m round for machine learning company DataRobot.
However, Brooks’s arrival has come with a clear mandate to review its processes after disruption to staffing caused in part by a 2014 change in compensation practices to cut carried interest (performance fees) from Intel Capital after Sodhani’s reporting line was changed from the CEO to chief financial officer Smith.
Newswire Bloomberg’s report that Intel Capital had hired investment bank UBS to review its portfolio, potentially offering $1bn of assets for sale.
An analysis by Global Corporate Venturing of Intel Capital’s portfolio – the 304 listed on its website are only a portion of its investments – and the proprietary quarterly investments and exits supplied by Intel Capital to GCV Analytics each quarter for the past decade indicates areas where a review could be more closely focused.
It is considered unlikely, given Intel’s concentration on both strategic and financial returns, that any assets sold would be at a loss. However, some smaller, non-lead deals could be reviewed, as well as those outside strategic areas, such as some past cleantech or consumer and software companies. With more than 60 companies in its software and services portfolio, from games platform Appionics to payments company YeePay, there is plenty to review. It is good practice to do this type of review regularly and indicates maturity by corporate or any type of venture investor.
But with maturity comes the recognition that change is the only constant. Deborah Hopkins, chief innovation officer at Citi and CEO of its Citi Ventures corporate venturing unit, introducing Brooks at the GCV&I summit, said: “We are here because of Arvind. His are big shoes to fill and to step in is a big deal.”
Brooks said he recognised this and was “learning something new every day. It has been completely energising and I feel 20 years younger than I did when I was an investment banker”.
He said corporate venturing offered more value than traditional VC by making pathfinding investments, supporting business divisions and being socially responsible, such as through the $125m Intel Capital Diversity Fund the firm launched in June to back startups run by women and underrepresented minorities, managed by Lisa Lambert.
Having a corporate limited partner was “quite a taskmaster”, Brooks said, adding: “Our responsibility is to be in between [financial and strategic extremes].
“Intel spends $25bn a year on R&D, M&A, business unit marketing, whereas Intel Capital does $500m, so we cannot just follow business units. It is increasingly important to plot a different path with a bigger agenda, investing as a hedge to business unit strategies.”
For a corporation trying to cut a path to further success, having a sharp mind running the world’s largest corporate venturing unit is a big help.
Intel’s investment activity since the beginning of 2015
