A week on from newswire Bloomberg’s report that Intel Capital, the corporate venturing unit of the eponymous US-listed chip maker, had hired investment bank UBS to review its portfolio and potentially sell up to $1bn of assets, and some of the noise has quietened.
An analysis by Global Corporate Venturing of Intel Capital’s portfolio (the 304 listed on its website here, segmented by sector, which is only a partial list 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.
Indicative of its strategic-and-financial focus, Intel’s recent venture investments have covered 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.
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.
Wendell Brooks, senior vice-president of Intel covering mergers and acquisitions as well as president of Intel Capital, this month eloquently talked in a blog about the company’s purchase for a reported $175m of Samsung and Deutsche Telekom-backed Replay Technologies to build out 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 retiling and computer hardware.
Intel Capital’s insights and dealflow should provide plenty of support in this corporate parent growth strategy.
Last month 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”.
Speaking to Global Corporate Venturing in October concerning his plans, Brooks outlined a strategy that would entail Intel Capital making fewer but larger investments, saying: “It is still early days, but I think we will take slightly larger bets, with more of a leadership role in transactions as opposed to passive secondary roles.
“The portfolio may be somewhat smaller when looking back at it five years from now, but with larger bets on technology. This is my predisposition.”
Brooks in his first public speech since the retirement of his predecessor, Arvind Sodhani, in January, then gave a powerful, energizing speech at the Global Corporate Venturing and Innovation Summit in California that laid out a clear vision of continuity – Intel Capital will continue investing $300m to $500m per year – and evolution by leading more deals (from 40% historically to 50-60% in future), adding more value by taking board seats, refining its processes to be faster and being less “insular” and working more with appropriate partners and always asking “what can we do for our portfolio companies, not what can they do for us?”.
It is this latter comment that could be most interesting in an Intel Capital review (memo* sent to portfolio companies below, courtesy of Fortune). Brooks, paraphrasing US President John F Kennedy’s famous speech about giving to your country, told attendees at the Summit and his Intel Capital colleagues to “ask not what your portfolio companies can do for you but what you can do for your portfolio companies”.
It is a question Intel Capital has been a leading venture firm in answering over the past near-decade under Lee Sessions, managing director of its portfolio business development and marketing, which covers worldwide marketing, press, information services, business development and events, including dozens of Intel Capital Technology Days (ITDs) and the annual Intel Capital Global Summit.
Effectively, Intel Capital has defined the modern venture organisation with this approach of trying to help portfolio companies with more than just cash and advice to boards. By offering public relations support, helping portfolio companies find customers, suppliers and acquirers, and insights to technology through the $25bn or so Intel spends on research and development it was a model studied by other top tier peers, including Andreessen Horowitz, GV (formerly Google Ventures) and GE Ventures.
What entrepreneurs want is fairly similar, albeit the specifics in each case are harder to help with: money, customers, tech insights, suppliers, organisation development/peer support, staff, help going international, legal advice and exit support for the flotation or trade sale.
Intel has 20 years of building its network with top entrepreneurs, other VCs (many of whom have hired from Intel Capital, according to Global Corporate Venturing analysis last year) and amazing insights into the process of building fast-growing, scalable companies, including its own.
If a review lays out the vision to utilise these strengths, along with the resources beyond investment dollars to execute, then Intel Capital will take its place at the head of the next generation of venture firms. If not, then the organisation could effectively be surpassed and its opportunity missed and a secondaries sale or otherwise will be a rounding error in its overall returns column.
*Memo, first published by Fortune (edited for style):
To our portfolio company CEOs,
I would like to address the market rumors that Intel Capital is contemplating the sale of a portion of its portfolio investments. Since taking over as President of Intel Capital in November, I have communicated a consistent message. We are going to focus our investing on companies where we can add value; these will be both strategic investments and pathfinding investments.
Since 1991, Intel Capital has invested more than $11bn in 1,440 companies in 57 countries. We plan to continue investing at our historical rate, $300m to $500m per year. We will look to lead investments in those areas where we can add value to our portfolio companies and create value and learning opportunities for Intel.
As part of my review of the Intel Capital business, I have commissioned a review of our portfolio. This is healthy for the organization. There are investments in our portfolio that are representative of a different investment focus. Provided that we could find a better home for such investments, we would contemplate a sale. We will concentrate our future investments on areas where we are better aligned to bring expertise and perspective.
This review has no impact on investment discussions currently underway. We continue to actively support companies in our portfolio and pursue new investments.
Best Regards,
Wendell [Brooks]