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The head of Intel Capital was a bit nervous at first in front of the camera, but all that disappeared when it came to talking about his company. The unrelenting efforts made by Arvind Sodhani after taking the helm have helped to dramatically turn the company around. He abolished the “established rule” of no additional investments, while undertaking a push towards “global investments and higher ROI” and completely transforming Intel Capital’s image as cumbersome and slow into that of a fierce, swift and potent eagle.
During his more than 10 years at Intel Corporation he has been responsible for, among other things, finances, investor relations and corporate credit. Arvind Sodhani has steered Intel’s investment arm in an entirely new direction, and he gradually brought it up the ranks of global investment companies. Today, Intel Capital is among the largest and most active corporate venture capital investment entities in the world.
With the enviable resources that Intel has, it’s important that Intel Capital becomes a globalized investment firm and helps the companies in its portfolio to achieve success.
Intel’s investment pattern was once widely considered slow and cumbersome, but that is not the case now. 2006 was the first full year since Arvind Sodhani became Intel Capital’s president. In that year, his team invested $1.07 billion in start-ups, a big increase from the $265 million in 2005. Intel Capital has changed from a follower to become a leader in many large-sized investment programs.
Arvind Sodhani, a gentleman of action, demanded faster and more accurate decision-making for the company’s investments. As a result, Intel Capital became more active and bold.
The significant changes he brought to Intel Capital include a larger amount and additional investments and closer relationships with invested companies.
“The next four to five years will be best time to invest in China.” This was a conclusion made by Arvind Sodhan during his speech at Tsinghua University on 26th March 2009.
On a sunny morning the next day, Arvind Sodhani showed up at the office of Intel China Ltd. in Beijing and happily gave an exclusive interview to TopCapital.
Doing what he does best
He joined Intel in 1981 as assistant treasurer of Intel Europe, and was then promoted to treasurer. “Increasing financial returns can boost corporate revenues,” he said in a down to earth manner, “and thus substantially increase investment managers’ income and arouse employee enthusiasm.”
Therefore, Arvind Sodhani abandoned the simple investment strategy of mainly focusing on strategic investments and on developing Intel’s downstream and upstream product lines. He said, “Achieving the right balance between strategic investments and financial returns is Intel Capital’s current goal.”
After Arvind Sodhani took office, Intel Capital began to change its original strategy of being a follower and making small investments. In the Clearwire investment of July 2006, Intel Capital acted boldly and invested $600 million in this high-speed wireless broadband services provider. Intel Capital’s past investments mainly ranged from $2 million to $4 million, with the largest one at only $355.4 million.
Intel Capital’s hefty investment also lured Motorola and Motorola Ventures, who were interested in wireless communications. Clearwire had given up its listing plan and chose to cooperate with Intel Capital because Intel Capital could help bring in strategic investors and provide unique value-added benefits. For example, Intel Corporation would enable the inclusion of WiMAX chipsets in next generation mobile computing platforms. This perfectly reflected the balance between strategic investments and financial returns that Arvind Sodhani was pursuing.
From then on, Intel Capital fundamentally changed its previous practice of seldom leading an investment or investing independently.
In June 2007, K2 Networks, Inc., an online game publisher, announced that it has reached a $16 million venture capital deal led by Intel Capital. Intel Capital was joined by new investors Greycroft Partners, Khosla Ventures, BV Capital and others. Compared with previous investments, this one was bigger and bolder. Though the specific amount of capital was not revealed, it is certain that Intel Capital’s stake in K2 Networks would play a very significant role in the company’s development. Moreover, the terms Intel Capital placed on K2 Networks were more attractive than those made by the other VC firms.
Quite a few leading VC firms had contacted K2 Networks, but they all asked for a majority stake in the company, which was unacceptable to K2 Networks.
Unlike other investors, Intel Capital not only provided an investment to sustain K2 Networks’ development, but also did not seriously dilute its holding. More importantly, Intel Capital was able to provide value-added benefits to K2 Networks that most other VCs are unlikely to match and was able to introduce potential international partners to K2 Networks.
Its close ties with more than 2,000 enterprises worldwide and its abilities to leverage global relations to find potential clients and partners for its portfolio companies differentiates Intel Capital from other VCs. Arvind emphasized: “What’s most difficult for start-ups is finding new clients and establishing a brand, but Intel Capital can help.”
In the year after Arvind Sodhani became president, Intel Capital invested $1.07 billion in start-ups versus $265 million the year before. After two years, Arvind Sodhani had filled the company’s void of leading investments and brought the proportion of investments led by Intel Capital to over 50 percent of all projects. The balance between strategic investments and financial returns is what Arvind Sodhani pursues persistently.
How to expand: Don’t miss out on emerging markets
Likewise, this is also strong evidence of Intel Capital’s efforts to encourage entrepreneurship and technology innovation worldwide.
To grow closer to the style of a VC but firm with unique capabilities was a decision made by Arvind Sodhani after he became president of Intel Capital.
The global investment policy became another “new rule” formulated by Arvind himself. The rule helped Intel Capital reach different corners of the world. As of February 2009, Intel Capital has set up offices in 25 countries and regions, and formed an investment network covering key cities worldwide.
The name Intel is very impressive to most entrepreneurs, but is still foreign to some countries. However, Intel Capital did not step back because of this, instead it began to help these countries and governments to promote the concept of VC. Such persistence helped Intel Capital to become one of the first VC companies in Vietnam.
In October 2006, Intel Capital and Texas Pacific Group (TPG) jointly announced an investment of $35.5 million in the Corporation for Financing and Promoting Technology (FPT), an ICT provider in Vietnam. Ten years ago, it was hard to get an internet connection in Hanoi, but today there are 13 million internet users in Vietnam. Arvind Sodhani said that the investment in FPT is representative of Intel Capital’s involvement in emerging markets. This is also the best evidence of Intel Capital’s strong efforts to encourage venture entrepreneurship and technology innovation worldwide.
In the same year, Intel Capital announced an investment into Orascom Telecom WiMax Limited, a joint venture with Orascom Telecom of Egypt. This deal was the first investment from Intel Capital’s $50 million Middle East and Turkey fund announced less than a year ago, and also underscores Intel Capital’s global investment policy. Arvind Sodhani said that after he became president, Intel Capital made many changes, with global investment being among the most vital.
Emerging markets are battlefields that Intel Capital won’t miss out on.
- In June 2005, the $200-million Intel Capital China Technology Fund was established in Beijing;
- In November 2005, Intel Capital set up a $50-million fund for investment in companies developing innovative hardware, software, local content, and services throughout the Middle East and Turkey;
- In December 2005, the $250-million Intel Capital India Technology Fund was established;
- In March 2006, the Intel Capital Brazil Technology Fund was set up, and the creation of the fund recognizes Brazil's position as South America's largest economy;
- In 2007 alone, Intel Capital invested about $639 million in 166 deals including 77 new deals;
- In 2008, for all the deals Intel Capital made, approximately 62 percent of funds were invested outside the United States, with about 31 percent going to Asian companies.
Translating Intel Corporation’s advantage of global operations into Intel Capital’s strategy and at the same time, positioning Intel Capital as a company different from other VCs is a change made by Arvind Sodhani, who has demonstrated his successes again and again.
Foray into alternative energies: Innovation is the biggest attraction
Investing in alternative energies will also make Intel part of the reformation in that area.
Intel Capital is following a trend by which large technology companies — like IBM, HP, National Semiconductor and so on — are attracted to investing in solar power PVs as the industry reaches the threshold of high-volume manufacturing and gigawatt levels of power production.
2008 was a landmark year for Intel Capital’s foray into solar power PVs. Its several $10 million investments underscored Intel Capital’s globalization efforts and strategies of investing in alternative energies.
In July 2008, German solar module developer and producer Sulfurcell announced that it has received funding of €85 million. Intel Capital led the fundraising, investing €24 million of its own capital. Selectively investing in innovative technologies is a concept that Intel Capital has followed all along.
Intel Capital invested in Sulfurcell because their thin-film PV solar modules and other technologies have demonstrated some of the highest energy conversion efficiency and capabilities. They also enable emerging applications such as Building Integrated PVs.
That month also marked Intel Capital’s investment of $12.50 million in Voltaix, a US company that manufactures materials for semiconductor chips and solar cells. Intel Capital thinks that product innovation is critical to enabling new capabilities in semiconductor device manufacturing. It believes improved materials such as those manufactured by Voltaix will foster innovation in the development and manufacturing of thin-film PVs, and the use of more advanced materials may help shorten the time it takes to manufacture PV cells.
With these investments, Intel Capital seeks to participate in the high-growth PV market, leverage its knowledge of semiconductor manufacturing into related "cleantech" technologies, and have an impact in material development, a key area for cost and process improvements for the PV industry.
“A few years ago, we started investing in alternative energies, because sophisticated technologies can help their development, which is an important part of the ecosystem,” said Arvind Sodhani. “As a natural outcome, we also became part of the revolution in this area.”
Intel Capital used to be known as a “shotgun VC," willing to shoot money in a number of directions to see what it might hit, but that is no longer the case. Investments are now targeted towards “innovation”. Arvind Sodhani firmly believes, “Investment in innovation is critical. Even amid the economic crisis, people are interested in new products, new services and new devices.”
Talent policy: Arvind Sodhani’s way of reducing staff and increasing efficiency
Even in small countries like Poland and Romania, Intel Capital has established special organizations.
According to Huainanzi on Military Strategy, “everybody should fully display their talents.” Though Arvind Sodhani, as a foreigner, might not have heard of this old Chinese saying, he has brought out the best of this principle in his management of Intel Capital.
In 2009, Intel Capital began an impressive expansion into Africa, and its first move was to appoint Sam Mensah as its director for SA and Sub-Saharan Africa. Mensah, an economics graduate from the University of Oxford, previously worked at Deutsche Bank and tech consulting firm Gresham Financial Systems. After joining Intel Capital, he contributed a lot to Intel’s expansion efforts into Sub-Saharan Africa, and he is the man to lead the specialized operation in this region.
In Intel Capital, many professionals like Mensah are assigned to the right positions.
Arvind Sodhani said, “We arrange investment professionals according to the areas and countries to be invested. Even in small countries such as Romania, we have investment organizations. The expertise of local teams is precious to us.”
To raise efficiency and bring the company into a battle-ready state, Arvind Sodhani improved the investment process and sped up decision-making. Meanwhile, he allocates more staff to communicate with portfolio companies, secures more seats on the boards of the invested companies, and assigns special personnel to oversee affairs associated with every portfolio company. In addition, Intel Capital has a special-purpose M&A team to provide related counseling and services.
By allowing staff to fully exercise their talents and capabilities, the company’s total staff did not increase in this period but was instead reduced. In 2005, Arvind Sodhani started to trim the company’s staff and by 2007 he had cut the headcount by 20% to 200 employees.
To encourage staff enthusiasm and reduce turnover, Intel Capital began to pay more attention to IRR. The company pegged part of employees’ compensations to their achievements, which encouraged staff in charge of investment projects to play a more active role in portfolio companies.
Amid the changes, there were often voices of opposition. However, Arvind Sodhani firmly believed that he was encouraging the company to do something right, improving its operations and creating a better work environment. Arvind Sodhani said, “We have seen notable changes. Previously, Intel Capital had high employee turnover. But after the changes the turnover was much lower, and now almost nobody wants to leave Intel Capital.”
Quotes from Arvind Sodhani
- Homegrown teams play a significant role in helping us get familiar with the local markets. Their rich operating experience and local knowledge is the cornerstone to ensuring quality investments.
- Challenges are always there, and only challenges in different periods are different.
- Investing in innovation is the key, and investing in enterprise/technology innovations is critical to weathering the economic crisis.
- Innovation won’t stop because of the economic crisis, and even amid an economic recession, innovative products or services remain attractive to consumers.
- We appreciate those venture entrepreneurs who know the skills they lack and how they can obtain those skills, but not those who don’t have the capabilities or cannot do a good job. It is valuable that they discover their own shortcomings and try to make up for them.
- In fact, we don’t compete with VCs, as we bring the invested companies very unique services that help their development. We are complementary to VCs.
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