Intel Capital Top VC: "Unique Companies ‘Rarer and Rarer’"

From Venture Capital Dispatch:

Intel INTC -1.38% Capital President Arvind Sodhani joined Intel Corp. in 1981 and now heads one of the oldest and largest corporate venture arms in the world, a venture arm that he helped build.
Intel Capital looks at about 1,000 companies per year and this year expects to invest about $355 million, with 55 investments done so far, a year that Mr. Sodhani calls “typical.”

Investments this year cut across stages and industries and range from wearable devices to drones to software to  advanced semiconductor technologies to a prototype Lego Braille printer created by a 13-year-old.
Mr. Sodhani talked to Venture Capital Dispatch during Intel’s annual conference this week about technology trends and how this year is going. The conversation has been edited.

Q: The tech industry is booming again, and valuations for startups have been going up. How does Intel Capital handle this situation?
Yes, valuations have gone up, and we are paying higher valuations. One could argue that the speed of innovation and the speed at which companies can be successful from startup to a successful company with revenue has shrunk. Time to money is shorter, and that could argue for somewhat higher valuations. But we have to ask ourselves if we are getting into a bubble.

We look at each investment very carefully, and test the investment at what we consider a normal valuation versus what’s being asked. In some cases, at the end of the day it wouldn’t make a difference, and in others it makes a big difference. It’s a question of the opportunities, and how much market share they can get and it’s very hard to generalize and it’s very company-specific. If it’s a great idea and a great team, we’re willing to pay up.

Q: With all the new technologies and companies, are you busier this year?
We do well when we stick to investing between $300 million and $400 million. 2008 and 2009 was a softer year for us–we are driven by the environment–but in a normal year, absent unique characteristics like 2009 and given our size and number of people and cash flow, that’s a good number.
Also we have exits every year. Year to date we’ve had 22 exits. They’re on the low end of numbers, but they are at the super high end of dollars. We’re having a great year.

Q: You mentioned earlier today that data analytics is a hot investment area for Intel right now. What else are you excited about?
Cloud is a huge opportunity in the sense that there’s an ongoing migration of enterprise IT into the cloud…and an app that ran in your IT shop will not run successfully in the cloud. You need cloud apps and security and orchestration and all kinds of stuff. That migration is a huge trend…and it’s also for both private and public clouds. They serve different needs.

In Internet of Things we’ll see more investments there, and also wearables–we want that ecosystem to develop—and security. [We’re investing] less in consumer Internet and less in media. SOCs (system on chip) and silicon manufacturing are areas we’ll continue to invest, at similar rates.

Q: Are there so many companies out there that you’re starting to see copycats?
A: There are always alternative companies that may be taking a slightly different path. Rarely do we see a unique company doing a unique thing. We do see those, but they’re getting rarer and rarer. Multiple people get the same idea.

Also, the willingness to take risks is expanded with the rewards. In the Bay Area, you don’t think twice about leaving a large enterprise to join a startup. You’ve seen that, and the opportunity is a big payoff. That’s less true in other parts of the world or even other parts of the U.S....MORE