Avram's Past / Finance / Intel

The relevance of Corp Venture Capital


I am Still Alive

Several months ago, I was contacted by a contributor to Forbes, com, Gil Press. He was going to spend some time in Israel, where I live (mostly) and wanted to interview me about Corporate Venture Capital. Frankly, I was surprised that at this point in my life, anyone was interested in interviewing me about anything, so I agreed. Also, I am writing a book about my time in technology. So I thought it might be helpful to me in clarifying some of my own thinking. We spoke for about 90 minutes. I found it enjoyable and indeed, useful. You can read the article here.

I think the article is pretty well written and researched. However, it wandered away from the topic a bit. It turned out to be more about me than about Corporate Venture Capital, though. I have mixed feelings about that. In one hand, I am happy that our discussions took Gil there because it makes me feel that people may be interested in my book. But I am uncomfortable when so much of the accomplishments of Intel Capital in the early years focus on me personally. It was a team effort. While I played a significant role, we certainly could not have achieved such success if it was not for Les Vadasz, who was my boss and partner as well as so many others that played significant roles. All that will be clarified in my book, I hope.

The Dangers of having a personality

I recall when USA Today published in 1996, a 1 1/2 page profile on me with the heading “For Intel, he is a One Man Think Tank.” There was a lot of anger amongst the management of Intel about that, and I could appreciate that. I often joke that I was one of the few Intel executives with a “personality.” I would also joke that I had more hair then all the other executives combined, some of whom took exception to that. What I meant by saying that I had “personality” was that I was one of the few that was an extrovert, comfortable with public speaking and interacting with the press. I could be funny and had great sound bites so I was often quoted. It worked out pretty well for me.

Fred Wilson is Wrong

I don’t really know Fred Wilson. He seems like a smart person and a very successful venture capitalist. Fred is quoted in the article as thinking that “Corporate Venture Capital is dumb.” He believes that corporations do not benefit from being minority investors. He says that if you want an asset, “just buy it.” Fred has been a VC most if not all, of his professional life. I am not sure he understands how large cooperation actually work. In any case, I disagree with him.

Importance of Corporate Venture Capital

There are two primary reasons for a Corporation to have an early stage investment group. The first and what I believe the most critical reason is strategic. Investing in early-stage companies and even interacting with venture capitalist provides a window into future markets and technologies. The second is financial. Corporations have certain advantages that Venture Capital Funds do not have, although they also have disadvantages. I believe done right, the early stage investing can not only pay for itself but also subsidize other activities also focus on the future such as an advanced development group which I also believe is needed by corporations. Investing in early-stage companies by a corporation can give them a window on acquisitions. Cisco has been a great example of that.

Intel’s Objectives in doing Venture Investments

At Intel we had established three objectives for our early stage investing; 1) grow the current Intel business 2) provide strategic insight that would positively influence the development of Intel’s strategy and 3) get a significant return on our investments. We succeeded in the first and last objectives and failed on the 2nd, which, sadly, was the most important, in my opinion. The financial returns were critical because it meant that we did not compete with other intel organizations for funds. We generated our own investment capital very early in the development of Intel Capital. The financial returns were also an indication that the business we invested into were successful, which was an indicator of their contribution to our first objective of growing the existing market. Unfortunately, we had no impact on the long term strategy of Intel. I still feel bad about this and often think what I could have done differently.

Intel capital was well integrated into Intel as a whole. The senior people like Les Vadasz and I were compensated primarily on the success of Intel as a whole and not on the performance of Intel Capital. I am aware that many corporations set up their venture groups like a captive venture fund. I think this is a mistake because it separates the members of the venture group from the corporation they serve. Such groups will become primarily financially focused. In this case, I would agree with Fred Wilson. One problem that comes from not running the Corporate Venture Group like a normal VC is compensation. The people in the organization can make far more money assuming they are talented if they leave and join a VC firm. This created a certain amount of undesirable turn-over. But fortunately, we we had no problems recruiting people to join Intel Capital.

I can’t really comment on the existing corporate venture groups including Intel. I just don’t have enough information.

6 thoughts on “The relevance of Corp Venture Capital

  1. I deeply enjoy your blog (and my childhood friends did Google (and Sidekick, and Android, and one even was at Intel till he moved to software. And I worked for an Intel VC project in a e-commerce and data center failure – Pandesic.)

    Back then I bought Larry and Sergei dinners (as a lame sales/consultant guy), I knew Marissa in Undergrad, and remember when GOOG struggled to monetize, and worried about paying the bills. I knew the 2 real “founders” of GOOG know one knows – one is branding / business, one is “contextual Ad model, pay per click”. (I even know the scary truth around Andy Rubin. This stuff is v bad if you scratch.)

    So if there are 3 great books in Post 1998 Tech they seem to be:

    (1) – Tom Perkins – Valley Boy, The Ed of Tom Perkins.

    In one key story he delineates how Intel was a vampire, and Perkins(!) was a true VC! No constraints.

    Steve J And Apple paid attention to “operation wooden stake” at HP. (TP was on the board). Few Chip companies own any unique tech today, and then. Intel was execution excellence but anyone can make the chip designs, and elite production execution. Apple brought main processors in house, and continues to play chip companies off each other. Intel executed but did not “invent” Or “secure”’unique valuable tech. (Vs say QCOM)

    (2) – Creativity Inc (I’m sad to have to mention this book. It is Endgame. Everything. Better than the Bible?). This is Steve in the woods, to walk out as “the 3rd coming of the Jobs.” This is TJeff, and a good family. The story of Pixar.

    (3) – there is also this HBR “Strategy” book on Gates, Grove , Jobs. (I have not read – it looks perfectly designed, as a compare /
    Contrast on the worlds greatest strategy games and players. “We think and analyze only backwards, and use logic, intuition and heart to project forward.

    We must wait for opportunity to come to us.

    At EOD — Intel Capital looked like a lame version of “Alphabet”. Which BTW Also looks lame too. I fade Alphabet all day. Google glass? Google Docs? The 5 social networking attempts. (And 10 – this is THE new google phone).

    Roger

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  2. Avram I am still grateful that via you Intel Capital invested in WOL.
    It was a good partnership .In June 1999 Intel invested 66 million at an Ev of 660 million and that become an EV of 12 billion several months later.Seems like a shrewd investment and for us it was very important to have another flagship name added to our shareholder list.
    On the other hand the biggest honour for myself was having you as an Supervisory board member.I learned a lot during that time and I am glad that I still continue to be able to “pick” your brain so now and then.
    Indeed the article makes you the voice of Intel Capital and I also met Lez Valdez as you know, however correctly the market (and the press) reflected on your position and voice to represent this group. I can understand why you are still contacted because your forward moving strategies and place in history as a true visionary make you very remarkable and interesting.
    Anyway Fred Wilson whoever he is does not get it.

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