In an industry that moves as fast as venture capital, all sorts of ideas can get swept up in the hype machine and quickly crowned as the newest of new things. So it is with recent talk about startup investing. Venture firms and funds, evangelists preach, have to do more than write checks. They must provide services to help their portfolio companies grow, which means offering everything from technology experts to market strategists.
Actually, this is not such a new idea. At Intel Capital, we have been working to support our startups with services for over a decade. I am often asked by new entrants in the venture space about why we do this, what we do, and how we do it. Having a systematic, scalable and cost-effective approach tied to Intel’s unique advantages has been key to adding value to the companies in which we invest.
We started offering services for the obvious reasons. Startup success does not happen in a vacuum. Building and scaling a business requires hard conversations, multiple pivots, and a level of public visibility that is extraordinarily difficult for many entrepreneurs to achieve when they are just starting out. By the time we invest, startups almost always have a team, intellectual property and a compelling solution that brings new technology to market, but they also have a limited amount of time and resources. We realised we had access to many of the resources they need, and we worked to set up a coordinated approach to help our entrepreneurs make the right connections for growth.
Whether introducing other VCs to participate in funding rounds, connecting our startups to Intel’s business leaders and technologists, finding the right service providers to help with growth, or arranging targeted introductions to end customers, we know what it takes to help a business scale. We help our startups develop their technology and business models, find diverse talent and build out their sales channels, all via Intel’s vast global network.
Our experience has shown our portfolio companies get the best outcomes when we proactively engage with them to build their businesses; in fact, we have led all VC firms in exits for the past decade. So my advice to any entrepreneur is to seek out firms with expertise and value-added services relevant to their business, to look at how long they have been providing them, and examine their track records. Three key areas on which to focus include engineering support, business development and exit expertise.
Flag engineering issues early
No startup arrives at the door of a venture firm with a perfect piece of technology. Sound concepts yes, but there are often major challenges in everything from coding schemes to mechanical designs – to say nothing of how a device or service interoperates with others.
It is less important that these issues exist than to find and fix them early. A company founder with a background in mechanical engineering, for example, may not know the best database system available. But if they can have a conversation early enough in a product’s lifecycle with someone who does, it can save huge rework costs and slash time to market.
Our approach is to match our 400-plus portfolio companies with the best engineering talent inside our parent company, a range that spans client and mobile computing, the internet of things, robotics, augmented and virtual reality, cybersecurity, cognitive computing, big data and the cloud. This open-door policy helps startups identify issues early, to drive out as much development cost as possible.
As Joe Hsieh, vice-president of multinational electronics maker Asus, put it in a testimonial video on our website: “Intel Capital is more focused on the technology itself – a lot of VCs are focused on the applications.” Asus is one of hundreds of leading corporations that have hosted multiple business development meetings with our portfolio companies over the years.
Build relationships quickly
If creating a product is hard, building the credibility necessary for a targeted dialogue with a major customer is even harder. Call it the paradox of new-technology development – while venture firms specialise in companies no one has heard of, that lack of familiarity can give a more established company pause when it comes to cutting a purchase order.
What entrepreneurs need is a partner with deep, broad and geographically relevant customer contacts – the chiefs and business unit managers at leading banks and insurance carriers, telcos, automotive companies, major broadcasters, consumer electronics manufactures or retailers – or all of the above.
Through our Intel Capital Technology Days, we host dozens of these focused introductions each year. In that same testimonial video, Trevor Matz, president and CEO of US enterprise software firm Aternity, said: “Intel Capital was the single biggest influencing factor that let us forge those early partnerships and meet with the companies and people that let us build our business.”
Aternity attended more than two dozen Intel Capital Technology Days over the past eight years and booked multimillion-dollar orders as a result, Matz said. Perhaps not coincidentally, Aternity was acquired this summer by Riverbed, which praised the startup’s “proven technology”.
This relationship-building process kicks into overdrive at our annual global summit, an invitation-only event that brings nearly 1,000 senior executives from Global 2000 firms – as well as Intel customers and partners – to meet the leaders in our portfolio companies. At last year’s three-day gathering, we booked more than 3,400 meetings between them all to help spur partnerships, sales and strategic agreements.
In addition to our signature Connect networking sessions, there is ample time for informal, and fun, relationship-building activities. The summit agenda also includes a closed-door session for portfolio companies to hear Intel’s latest technology forecasts, keynote addresses from the CEOs of Salesforce, Workday, Intel and Verizon, panels on the next wave of data analytics and immersive sports technologies, and the announcement of a new slate of startup investments by Intel Capital.
Exit smartly
The approach I am describing centres on mutually beneficial relationships – ones that create value not just for Intel Capital but also for Intel, its customers and partners and, of course, the portfolio companies at the heart of what we do.
When all is said and done, the benchmark of a VC’s value-added services is the degree to which they lead to a properly valued exit. Over the past 25 years, Intel Capital has invested more than $11.8bn in nearly 1,500 technology startups – and more than 600 have gone public or been acquired.
As investors, we want the same thing as our founders – smart, scalable and strategic growth. In fact, we often lead initial investment rounds and write the term sheets for subsequent funders to ensure the protection of the company’s value. Virtustream co-founder Rodney Rogers, at last year’s Intel Global Summit, credited our guidance during negotiations with other potential investors. “Intel had a really strong point of view, and at the end of the day, they were right,” he said while discussing how to choose a VC. Virtustream, of course, was acquired by EMC for $1.2bn last year – just six years after its founding.
It is important to note we want not just any exit, but the right one. Sometime it is an initial public offering, other times a third-party acquisition. In rare cases, our parent company buys a portfolio investment. But whatever the liquidity event, every portfolio company benefits from a value-added model that we have had in place for a decade.
It is pretty great when something old feels new again.