Q&A: Intel Capital's Sudheer Kuppam

Q: How has the Intel Capital portfolio been affected by the challenging exit market?

A: Irrespective of market conditions, we have done extremely well in Asia Pacific and the majority of our exits are IPOs. In 2012, we had two - Multi Commodity Exchange (MCX) in India and security chip developer Sinosun in China. This year ASPEED Technology went public on Taiwan's GreTai Securities Market. In addition, Olaworks in Korea was acquired by Intel last year.

Q: How does the strategy for investing in developed markets in Asia different from that for emerging?

A: In the mature markets of Asia Pacific - Japan, Taiwan and Korea - we are always looking to enable the next generation product. For example, our current emphasis is on enabling ultrabooks, smartphones and tablets, to enhance the user experience. We do invest in disruptive technologies but typically these are fewer than 10% of our total portfolio. We have a category called "eyes and ears" where we try to identify technologies that could potentially have a significant upside if they become financially and commercially viable. In emerging markets the motivation is to drive more users to get on the Internet and use technology. It's kind of evangelizing technology, to increase PC and broadband penetration rates.

Q: Could you give some examples of this?

A: If you look at the deal in Vietnam where we have invested in Vietnam Communications Corp (VCC), they are pretty much a local content as well as consumer internet business and services provider. In India, we have Yatra.com to enable online travel, PolicyBazaar for online insurance, including auto, home and life. And then we have investments in electronic program guides in the education vertical. We want to enable the usage of technology to deliver education, whether it is college prep or admission prep.

Q: What are the growth themes for Asia?

A: For emerging markets in general, we want to look for data center build-outs and enable cloud computing in the region. Most of the countries within Asia Pacific sooner or later will demand that all citizens' digital data should be within their territorial boundaries, which means that numerous data centers have to be built. That's an area of significant interest for us. At a high-level, we have very few themes: mobility, by which I mean Asia Pacific has a lot of languages so we want to build voice and speech recognition for local language and content on smart devices; consumer internet, enabling online education or deploying tech usage in delivering education; and software and services

Q: How large is the share of funds deployed in Asia?

A: Typically all of Asia Pacific, including China, is 25-33% of our global deployment. In 2012, China had a 7% share while 17% was invested in the rest of Asia Pacific. That's equal to the 17% spent in Western Europe and Israel. Historically, on an average we have deployed $300-500 million every year and one third of that is in Asia so we have $100-130 million available to be invested. China and India are the two significant markets Intel Capital is targeting, so if you look at our 20 investment professionals in the region, 12 of them are in these two countries.

Q: Do you see more growth in Southeast Asia?

A: We are more opportunistic, at least in Southeast Asia, because in general we try to look for investments there that could target the entire region. Once you consider the entire region as your customer base, you have half a billion population and that would enable any business to scale. Most of the investment opportunities that we typically look for are of that nature. The exception is Vietnam where VCC is a conglomerate of several consumer internet businesses, which would also enable them to scale within Vietnam.

Q: Intel this year announced new products and efforts to accelerate its presence in mobile. What does that mean for Intel Capital's strategy?

A: Intel is now supplying Atom processors in the smart device space so we want to enhance the user experience for the average consumer using any of these devices. Our strategy will be trying to get better features for these devices, such as voice recognition, and speech recognition. For example, the majority of India does not speak English. For these 1.2 billion people, if you can get speech recognition in their local language you are now addressing a much larger market. Some of these features, whether it's gesture or speech, require a lot of processing power, which has traditionally been the forte for Intel architecture and processors.

Q: Do you expect Asian corporate venture capital units to play a bigger role in the region?

A: As long as a company is aligned with us on the mobile strategy that we are pursuing, we are willing to partner with it. We have co-invested with a lot of corporate venture units worldwide so in general we don't consider co-investors as competition because the venture industry works on a syndication basis. You always partner with other VCs or corporate VCs and try to foster entrepreneurship in the region.

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