“If they can’t do it in California, it can’t be done anywhere,” Anglo-American writer Taylor Caldwell once remarked. Silicon Valley – which covers Californian cities including Cupertino, Menlo Park, Mountain View, Palo Alto, Redwood City, Santa Clara, San Jose and Sunnyvale – has long been the heart of innovation and technology.
“California’s startup ecosystem has an unfair advantage in the network of people in or related to startups and the associated events and conferences about or related to new technologies, markets and applications,” said John Suh, vice-president and founding director of Hyundai Cradle, or Centre for Robotic-Augmented Design in Living Experiences, which is a CVC subsidiary of South Korea-headquartered carmaker Hyundai.
“California’s ecosystem continues to be a net attractor of founders and talent that want to work in startups and the ecosystem that supports startups – for example, service providers, consulting firms and VC. So this means it continues to justify our presence and staff growth in California – Silicon Valley in particular.”
Nick Washburn, senior managing director and chief operating officer of Intel Capital, semiconductor and data technology producer Intel’s corporate venturing arm, added: “California has an abundance of capital from a venture and growth equity perspective and robust angel investor networks that help startups with seed funding. There is a really strong magnet of talent that – for a long time – was really hard to beat.
“There is a great pool of talent in California – Silicon Valley just attracts some of the world’s best technical talent, which can be a great asset to companies as they are recruiting engineers for cloud-native technologies or artificial intelligence and machine learning.”
Intel Capital does not choose companies based on location, said Washburn, but many of the fund’s US-based portfolio companies are concentrated in the San Francisco Bay Area because of the strong talent pool present in both startups and large tech incumbents, as well as access to capital.
However, Washburn believes that is changing. “We are going to continue to see companies formed outside of Silicon Valley – the front and centre in the innovation ecosystem and the venture space – and we certainly have a large share of companies headquartered in California, but we see opportunities everywhere.”
According to PitchBook data, the number of corporate-backed investments grew steadily in California from 2009, with a slight decrease in 2016 and 2017, but reaching its peak in 2018 – with $48.3bn of deal value and 857 deals. The deal value declined again significantly in 2019, however, down to $28.6bn spread across 772 deals. The exits in the state involving CVC units, on the other hand, reached a record high last year, with $167.4bn of exit value compared with that of 2018: $45.3bn – nearly a fourth.
This could be explained by a surge in talent and opportunities elsewhere in the US and other countries. Intel Capital’s Washburn reiterated that within the US, Austin, Boston, Boulder, New York and Seattle are very strong technical ecosystems with great talent and customer bases as well, and that many large tech and non-tech public companies have innovation offices leading their digital transformation efforts out of Silicon Valley.
“We [at Intel Capital] are very much focused on finding the next best thing, regardless of where it is. We strongly believe that you can build a great technology company anywhere,” Washburn said.
For example, Intel Capital has invested in New York City, Boston and Texas, among others. Washburn is on the board of an Intel Capital portfolio company based in NYC – text analytics software developer Amenity Analytics.
“We are willing and able to look at anything in the United States – we look at technical centres of excellence and academia,” said Washburn, adding that many spinouts of Stanford University and University of California Berkeley in the Bay Area are outstanding, but also highlighting University of Michigan, Massachusetts Institute of Technology, Carnegie Mellon University and University of Illinois Urbana-Champaign are also remarkable.
Intel Capital works actively with universities, having backed the $20.6m series A round for Anyscale, a distributed computing framework developer spun out of Berkeley, in recent months.
Hyundai Cradle also operates across the world, with hubs in South Korea, Germany and Israel. Its portfolio companies include Solid Power, a solid-state battery manufacturing spinout of University of Colorado Boulder, as well as Israel-based computer vision technology startup Allegro.AI and industrial security drone manufacturer Percepto.
Hyundai Cradle collaborates with California-based CVC peers and institutional VCs, too, said Suh, adding: “There are many ways we interact [with the ecosystem]. It includes, but not limited to, deal sharing, co-investing, research sharing, talent acquisition, business unit relationship support, internal and external speaking events, limited partner business relationships and business introductions.”
Washburn noted that Intel Capital looks beyond the US too. “We have a very global view. We are also thesis-driven investors who identify world-class founders that are striving to solve technical and difficult challenges that can drive very big market outcomes for venture returns.”
Intel Capital invests between $300m and $500m annually, conducting roughly 30 new deals each year, backing entrepreneurs based in the US, Canada, China, Israel and Western Europe. It has a 320-strong portfolio across the world.
Washburn concluded: “We [at Intel Capital] emphasise a global viewpoint because it helps drive diversity of background, diversity of thought and diversity of experience within the employee bases of our portfolio companies, which is not only good for business but also good for helping drive much-needed diversity and inclusion within the broader tech ecosystem. I am glad that Intel Capital is able to take up a more diversified viewpoint.”
