In his first trip to the UK in four years, Intel Capital president Arvind Sodhani told the audience at the Global Corporate Venturing Symposium yesterday that financial returns are as importamt as strategic success when running a corporate venturing unit.
Intel Capital, launched by Sodhani in the 1980s, came out of the realisation that semiconductor maker Intel could not fund all the research and development it needed to grow the ecosystem.
Intel decided to pursue minority investments in smaller companies to solve that problem, and the operation has since grown to a global team of 200 people.
One of the biggest challenges faced in corporate venturing is scale, and along with a motivated team, the support of the CEO and the board is very important.
Financial returns are as critical as strategic value, Sodhani said, speaking in a fireside chat with Global Corporate Venturing editor Toby Lewis. Sodhani said corporates will need to be patient as the losses will show up first, and strategic value can often be subjective. In the early 2000s, many corporate venturing efforts were shut down because the numbers were not attractive to the parent companies.
Although there is currently a boom in corporate venturing, Sodhani was quick to point out that “the losses will come before the gains will come” and added that, as corporate venturing efforts get going, most of these will have to figure out “how they will deal with those losses”.
Their success also depends on corporates figuring out what exactly they are looking for from their investments, as startups that become billion dollar companies are far and few between, though Intel Capital does chase those too. Intel Capital holds annual meetings with their portfolio companies to receive feedback and to set out goals.
Intel Capital’s team is constantly keeping track of new potential markets, and it recently set up an office in Nigeria. One of the challenges when setting up in a new market is the lack of a local startup ecosystem, which Intel Capital will then need to assist in creating. Sodhani pointed out that not all new offices are a success, and that luck also plays a role.
Concerning the future, Intel Capital’s core focus is the continuum spanning wearable devices through the internet of things to data analytics. While data analytics is still in its infancy, Intel Capital recently made a $740m strategic investment in data management technology company Cloudera, and Sodhani noted that the cloud is a potential one trillion dollar industry.