VCCircle

Exclusive: Don’t be surprised if Intel Capital starts investing in a solar energy company (!) or angling for a buyout in India. The fact is you will be seeing such things very soon. The venture capital arm of chip maker Intel Corporation, which currently manages a $250-million India technology fund, is carving a new role for itself in the subcontinent as it broadens its scope of activity in terms of technologies it seeks to invest in or the stage and size of the companies it wants to partner with.

In an exclusive interview to VC Circle, Sudheer Kuppam (right), Managing Director of Intel Capital for India, Japan, Australasia and South East Asia, said that the venture fund will also look at technologies other than that fall within the Intel macrosystem, while it will follow a stage-agnostic approach from now on as opposed to its earlier focus of pure ventures.

“Going forward, you will see a renewed Intel Capital,” said Kuppam, who assumed the current position in March this year. “I am here to drive Intel Capital in a new direction.”

Kuppam said Intel Capital will not only look at technology in a broader sense (such as live TV on cell phone; not just related to Intel chips), but will also be interested in investing in unrelated areas like cleantech (for instance, solar energy). “You are essentially bringing technology to the masses. As the technology awareness gets built up among masses, there will be a trickle down effect, which will in turn improve broadband penetration,” Kuppam said.

He said the fund will follow a stage and sector-agnostic approach. So it can invest in companies starting from early stage to late stage to pre-IPO, PIPE (private investment in public enterprises) and even buyout deals. He adds: "We are currently evaluating deals as large as $100 million."

Lead Or No Deal

It’s not just about broadening the mandate of the fund for Kuppam. Intel Capital is now turning an active and aggressive VC fund. For one, they may not participate in an investment round unless it’s led by Intel Capital. That’s a big shift. For instance, earlier Intel Capital followed WestBridge Capital Partners (now Sequoia Capital India) in their $10-million investment in People Group (the owners of Shaadi.com).

Even globally that was the case. “Historically, we never led the deals. But that’s changing. For instance, we have led the last 50 deals (globally).” In India too, Intel Capital is likely to be in the front row and lead the deals rather than following other VCs. “If we are not leading the investment, we will probably never play,” Kuppam emphasized.

Besides, Intel Capital had traditionally shied away from making follow-on investments. That will also change since the fund wants to commit larger funds and be a significant stakeholder in the company. “We have a cradle-to-grave policy. We will be with the company, supporting them through multiple rounds of investment.”

In India, the largest single investment done by Intel Capital was $10 million in NIIT, while the future investments will probably see multiples of it.

Global Makeover

If Intel Capital Asia Pacific is going through a change, it is actually part of a global makeover that is being undertaken by Intel Capital’s worldwide chief Arvind Sodhani. Intel Capital, since it set up shop in 1991, has been following a “drop and run” strategy, according to industry observers like Dan Primack of PEHub (see a related post). It used to make very small investments in companies which essentially fell within the macro-ecosystem for Intel products. It almost never led deals or participated in follow-on rounds, Primack says. “Its ROI was judged less in IRR and more in Intel Corp.’s quarterly numbers.”

But after Sodhani took over as the chief of Intel Capital in March 2005, there has been a significant shift in policy. He insisted on leading the rounds, and broadening the scope of investments in terms of sectors and stages. For instance, In July Last year, Intel Capital led a $900-million round in Clearwire Corporation, a high-speed wireless broadband services provider, of which $600 million was committed by Intel Capital alone. That was the largest investment ever done by Intel Capital in its history.

This mood is reflecting in India too with Kuppam moving in March from Intel Capital’s California office, where he was the director of Intel Capital’s Flash Memory and Semiconductor sector. Some of the investments overseen by Kuppam included the recent $65 million deal in Taiwan-based Powertech Technology, Inc.

Kuppam, a graduate of IIT Madras and a post graduate from Rensselaer Polytechnic Institute, US, first joined Intel in 1997 and moved to Intel Capital in 2000, where he was part of making investments in Asia, Europe and North America. (Prior to Intel, he was a a process development engineer at LSI Logic).

The India Agenda

Intel Capital has invested an estimated $200 million (the firm refused to reveal the number) in some 50 companies since it debuted in India in 1998. Some of its portfolio companies include NIIT, a leading IT learning solutions company, Nipuna Services, the BPO arm of Satyam Computer, and Tejas Networks, a communication gear company, and the latest being FINO, a banking software company, and Comat Technologies, an e-governance company.

It has also made several exits like Deccanet Designs and FutureSoft (both strategic sale), Rediff, Subex Systems, India Infoline, Sasken Communication Technologies, R Systems, and NIIT (all IPO).

Kuppam will not reveal the returns from these investments, but he is clear that the pace of investing will pick up. Kuppam is supported by six investment managers in India – two in Bangalore and four in Mumbai. Each investment professional is expected to do two deals a year, and going by that number, the fund is targeting about 12 investments a year in India, although there is no pressure to invest. “Each investment manager screens about 20-40 investments at a time,” says Kuppam.

Where Opportunities Lie

As long as the company is from the technology sector, Intel Capital is game to look at the opportunity. However, there are favourite sectors: For one, consumer internet. Says Kuppam, “Historically, we have been successful in that sector, so we think it’s the sector to go in for.” So areas like the internet, digital media, mobile value added services, and wireless technologies will be in the radar. Then cleantech areas like solar energy. "Unless you have power flowing into the bottom of the pyramid, you can’t have technology initiatives,” Kuppam justified.

However, the fund will remain opportunistic and nimble-footed. WiMax is one opportunity waiting to be tapped in India. “We have done a lot of work on WiMax. It’s the most economical way of taking broadband to population,” said Kuppam, who would bet on a WiMax service provider. But he will wait till policy hurdles are cleared – such as spectrum allocation.

Till then, Kuppam has his plate full anyway in his new role as a private equity fund manager.