Intel re-ups Asia

With nearly two decades of venture capital experience worldwide, and investments of $9.5 billion in 1,000 companies in 46 countries with 170 IPOs and 231 mergers or acquisitions among its innovative tech startups, Intel Capital offers a study in best practices for global investment organizations. Notably, more than half of its dollars go toward tech startups outside North America, with about one third of those overseas financings in Asia.

Emerging innovation

“Innovation doesn’t stop during economic slowdowns,” said Intel Capital President Arvind Sodhani, speaking at the firm’s annual CEO Summit, recently held in Huntington Beach, Calif. He added that new technologies can drive economies “back to prosperity,” and signaled that Intel will remain steady with its investments in tech innovation throughout various geographies.

Financial support of young tech-based businesses not only fits the corporation’s strategic aims of selling more Intel-made hardware to increasing numbers of developing companies but also aims to give Intel a respectable investment return and provide an early read on new innovations, pointed out Sodhani, also Executive VP of Intel Corp. and former treasurer of the major corporation for seven years.

At Intel, emerging markets are clearly in the forefront of its formula for investing, led by high growth rates and tech opportunities that are unfolding in a broad range of sectors, according to interviews with Intel Capital MDs in Asia, Sudheer Kuppam in Bangalore and Richard Hsu in Beijing. 

Of Intel’s seven new deals totaling $25 million, its four co-investment deals in Asia showcase that multi-pronged approach: Crucialtec, a Korean manufacturer of an optical tech device for mobile phones; V-cube, a Japanese developer of web videoconferencing systems; Internet and mobile portal Phoenix New Media in Beijing; and semiconductor equipment manufacturer Gudeng Precision Industrial Co. in Taipei.

India/China hinge

Geographically, Intel’s formula of investing for Asia hinges on India and China, where the firm has dedicated funds: a $200 million Intel Capital China Technology Fund established in June 2005, and a follow-up $500 million China tech effort in April 2008; with a $250 million Intel Capital India Technology Fund set up in December 2005.

These efforts make Intel one of the larger venture investors in the world.
Altogether, Intel Capital has put $50 million in 80 Chinese companies since its first investment in the market in 1998. In India, Intel has backed 60 startups with $200 million since 1998. Moreover, Intel has managed to achieve an enviable track record of publicly listing 20 companies from its India portfolio, according to Kuppam.  

Both Asian MDs pointed out that Intel prefers to take a lead position in investments, though it often co-invests with VCs. Deals tend to be in the $5-$15 million range, with an equity stake “sweet spot” of 5-10%, they noted.

Intel Capital has enjoyed a good track record partly because its investors receive insights into promising deals through their contact with tech specialists in the business units. They also engage in frequent phone conversations and have annual team get-togethers. Said Hsu, “The venture capital culture we have generates smart, innovative investors who can add value to entrepreneurs.”

Beijing gets VIP gloves

Intel Capital recently restructured its investment organization for a greater focus on China from Beijing, where its country business unit is based, rather than previous oversight of the Mainland from Hong Kong. In June, Hsu was promoted to managing director of Intel Capital China from investment director.

Concurrent with that reorganization, management of the firm’s investment activities in Taiwan and Korea were moved to its Santa Clara headquarters to avoid “getting lost within the Greater China region because of their relatively small size,” said Hsu. He added, however, that Taiwan is figuring larger within China deals as cross-Straits collaborations develop, particularly in the semiconductor market.
  
Hsu said Intel Capital investors are “enthusiastic” about prospects in China and he cited the Chinese government’s drive to encourage home-grown technology, the motivation and spirit of China’s entrepreneurs, and the country’s rising consumption levels as forces that are propelling innovations in the market. In addition, he singled out China’s new Shenzhen growth board for public listing as a stimulus for the market to breed more tech startups and investments.

Indeed, Intel is looking to list a few more of its own tech portfolio companies on China’s new ChiNext exchange. In October 2009, Intel Capital had an IPO on China’s Growth Enterprise Market for Enjoyor Technology Group, a digital healthcare solution and traffic management service, after an investment early this year. Another deal headed for the public pipeline is Chinese outsourcing service HiSoft Technology International Ltd., Hsu said. 

On the India trail

The stream for public listings in India is looking equally promising as the new year beckons, said Kuppam, who oversees India, Japan, and Australasia as well as Southeast Asian markets.  He pointed to telecom product Tejas Networks and software outsourcing firm Persistent Systems Pvt. Ltd. as two of its portfolio companies getting ready to go public in India.  “The public markets have rebounded since March,” he pointed out, commenting on the timing of the listings.

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• Topics
• Technology
• Venture
• South Asia
• Greater China
• Early-stage
• Richard Hsu
• Sudheer Kuppam
• Arvind Sodhani
• Intel Capital