Q&A: Intel Capital's Arvind Sodhani

Q: Several sectors have been added to Intel Capital's investment areas. Why the particular interest in wearable devices technology?

A: Intel Capital's focus continues to evolve with the evolution of technology. Obviously wearable is an emerging trend that we've started investing this year. There have been several investments, including Basis Science, Thalmic Labs and Recon Instruments, and more are in the pipeline. We believe that there will be hundreds of millions of wearable devices in the future. It generates a lot of data that can be collected and analyzed over time - and that data goes from the wearable to smart phones, ultrabooks, tablets, and to the cloud where it is typically stored. This has implications for connectivity, wireless, networking, servers, storage, and data analytics. It touches the entire spectrum of computing and we're busy in building the ecosystem to support the evolution of wearable as a category.

Q: In which sector do you see the most potential for wearable devices technology?

A: The health sector will be very interesting - health insurance, hospitals, and healthcare management companies. They can say, "Okay, now we have all the data, the body metrics, blood pressure, heartbeat, blood temperatures sort of information for tens of millions of people collected in multiple years. Who are the candidates for diabetics and heart disease?" They can also figure out whether these individuals are doing a lot of exercise, for example.

Q: What other areas are you interested in?

A: We are investing in all the sectors that are relevant for computing, which obviously includes data centers and cloud computing. The migration of IT to the cloud is very important for us, as well as big data analytics, consumer-related services and consumer internet education. Then there is mobility, which we split into smart phones and tablets, ultrabooks and perceptual computing.

Q: Google has started making some non-core investments. Will Intel Capital do the same?

A: We are focused on investment areas that ultimately relate to the long-term business strategies of Intel Corporation as a whole. We are supporting the development of the ecosystem - in terms of innovation and business models - across mobility, servers, data centers, data analytics, storage, networks, smart phones and tablets. We're not investing in things outside of that domain.

Q: There is a huge demand for low price, high performance smart phone and tablets, particularly in China. Would Intel Capital invest in companies that make these devices in order to promote Intel's mobile chips?

A: Our historical practice is not to invest in customers. This is for the simple reason that, if we chose to invest in one customer and not the others, it would be unfair.

Q: Which areas have you stopped investing in recent years?

A: We no longer invest in WiMax technology. WiMax was a huge ecosystem investment effort that we undertook between 2005 and 2009. We also stopped investing in cleantech, an area in which we have made a number of successful investments. For the latter sector, we found that the R&D evolution and our value proposition in process technology were not relevant to solar cell manufacturing. Therefore, it didn't make sense for us to continue to invest.

Q: Intel Capital rarely features in angel rounds. Would you describe yourself as a later stage investor?

A: We are a stage agnostic investor - we do everything from seed all the way to IPO and post-IPO. All our cash comes from Intel Corporation, so we are not a fund. We don't have a 7-10 year window, so we can be very patient, but we are looking for companies that will start producing sizeable revenue in the 3-7 year timeframe. "Sizeable" means $50-100 million in revenue.

Q: What are valuations like?

A: From time to time, certain sectors get very hot. Software as a service, data analytics and cloud computing have all become very, very expensive. For private companies, overvaluation is equally a danger, because if you cannot deliver on the expectations tied to those high valuations, then you get down rounds, which can be very painful for existing investors. Companies need to be sensitive to overvaluation.

Q: What kind of returns are you are looking for?

A: We are looking for appropriate risk-adjusted returns. As you can imagine, this is a very risky investment area - many start-up companies may go down or go bankrupt. Like anybody else, there are failures in our portfolios. Having said that, we have invested more than $10.9 billion in around 1,300 companies, including about 300 start-ups. We have made 526 exits, including 202 IPOs on exchanges around the world and 324 portfolio companies that have been acquired or participated in mergers.

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