- The "Smartest Venture Capitalist In the World," ARVIND SODHANI, President of INTEL CAPITAL, Explains To PrivCo: Why Speech and Optical Recognition Technology Is "The Next, Next Thing," Why TURKEY Is One Of His Top Under-Appreciated VC-Investing Plays, The #1 Quality INTEL CAPITAL Looks For In Startups Before Investing....And Why He's Listed The Majority of The VC Firm's 200+ IPOS On the NASDAQ & Not The NYSE (124 IPOs listed on NASDAQ)
- In an exclusive one-on-one interview with PrivCo Founder & CEO Sam Hamadeh At The NASDAQ, Silicon Valley based SODHANI Reveals Key Insights Into INTEL CAPITAL's 21-Year Record Of Success (Including 200+ IPOs, Another 300+ portfolio companies acquired), the Future of Mobile Technology He's Investing In Now, And Advice for Tech Entrepreneurs on Getting Funded
March 11, 2013 5:00 am ET - Intel Capital President Arvind Sodhani sat down with PrivCo Founder & CEO Sam Hamadeh Thursday afternoon at the NASDAQ stock exchange in New York for a rare, exclusive in-person interview regarding Intel Capital's #1 Ranking as the Most Successful Tech Venture Capital Firm of 2012 (ranked by number of private tech company exits via acquisitions, as part of PrivCo's Annual Private Tech Company M&A Research Report), the keys to the firm's success, what he looks for in a startup before funding, and what he's funding now as the "next, next" thing years in advance.
[PrivCo's Top 20 Tech VC Firms of 2012 Rankings - Intel Capital Ranked #1 Tech VC Firm of the Year: http://www.privco.com/top-20-venture-capital-firms-with-the-most-private-tech-company-exits-in-2012]
Mr. Sodhani, who moments earlier had rang the NASDAQ closing bell, was in town to meet with executives of the NASDAQ regarding upcoming IPOs (Intel Capital has a good relationship with NASDAQ - 124 of their 201 IPOs since their founding have been conducted through the exchange). As the Co-Founder of Intel Capital (and a former board member of the NASDAQ), Mr. Sodhani oversees all venture capital investments for Intel Capital, as well as all mergers and acquisitions activity for Intel Corp. (a man who can sign off on a $1 Billion acquisition overnight). PrivCo Founder and CEO Sam Hamadeh met with Mr. Sodhani at a private reception held in the industry veteran's honor after the ringing of the NASDAQ bell, and interviewed him regarding Intel Capital's past performance and future aspirations.
(March 7, 2013 - Q&A Interview Between Intel Capital President Arvind Sodhani & PrivCo CEO Sam Hamadeh At The NASDAQ Stock Exchange In New York):
SAM HAMADEH (PRIVCO CEO): Congratulations on your #1 tech venture capital firm ranking in our latest annual VC Firms rankings, which surprised a lot of other VC firms.
ARVIND SODHANI (INTEL CAPITAL PRESIDENT): Thank you very much for awarding such an honor.
HAMADEH: Well it was PrivCo’s exit data that told us the rankings, so that wasn’t our judgment call, the data was conclusive (In 2012, Intel Capital had 28 exits by M&A and 7 by IPO).
SODHANI: Well we appreciate it and are honored to be named by PrivCo as the Top Technology Venture Capital Firm of the year.
HAMADEH: Why do you think Intel Capital was so successful in getting so many of its companies acquired last year?
SODHANI: Last year was an especially good year for us, but also 2011 was an exceptionally good year for us as well, so we likely would also have ranked highly for 2011.
Consistently though, we average about 28–30 exits a year and the exits are a combination of M&A Exits and IPOs. About two-thirds to three-quarters of our exits are through M&A and a quarter or so are through IPOs. Last year [2012] was a light year for IPOs for us at Intel Capital, but on average we do about 10–12 IPOs per year for most years. Since Intel Capital’s founding [1991], we have had 201 of our portfolio companies IPO.
HAMADEH: And how many of Intel Capital's 201 IPOs were listed here on the NASDAQ?
SODHANI: Almost all. We've had 124 of our IPOs list on NASDAQ. Most of the rest on foreign exchanges, with a small minority on the New York Stock Exchange.
HAMADEH: So you don't usually work with the NYSE to list an IPO?
SODHANI: We have a close relationship with the NASDAQ going back many years.
HAMADEH: And you were also a Board Member of the NASDAQ for several years?
SODHANI: That’s right. So we expect to continue to work with NASDAQ for the majority of our IPOs.
HAMADEH: Well I can see why they rolled out the red carpet for you today and had this lavish reception in your honor! [Sodhani laughs] For your more typical exits, through acquisitions of your VC investments, how many did Intel itself act as the buyer?
SODHANI: Intel Corp. actually ends up acquiring less than 2% of our VC portfolio companies. I’m sure that figure would surprise most people, but it’s actually very rare. Of the 1,265 investments made by Intel Capital, Intel only bought 16–17 companies.
HAMADEH: That is surprising I’m sure to most other VC firms - though in fact recent PrivCo M&A data confirms that – I know other corporate venture capital arms see their VC investments in part as a feeder pool of potential acquisitions. That’s clearly not Intel Capital’s aim.
SODHANI: The aim for us is exit – whether through a sale of the company or through an IPO – at a profit for Intel Capital and for Intel Corp. Also important are knowledge and learning with Intel, keeping up with emerging technologies and innovations.
HAMADEH: We have PrivCo data here on some of your recent investments in 2012 and so far in 2013. We see your investment in BlueStack Systems [a provider of mobile application software] just this week, also Storenvy [ecommerce services] and Urban Airship [mobile marketing] last month and Persimmon Technologies [industrial robotics] in January. There’s no obvious pattern at first glance. What are the key themes of your most recent VC investments that tie these together?
SODHANI: With our investments, we are trying to do one of two things. The first is building an ecosystem within several key sectors (such as smartphones and mobile). In a particular year, we might cluster together several VC investments in related companies, so that they can work together or learn from one another and grow within that ecosystem. Secondly, we’re looking for new technologies that will add on to Intel Corp.’s products and contribute to the learning and knowledge sharing within Intel Corp. regarding emerging technology trends.
HAMADEH: The very best venture capitalists – and based on our data you may be "The Smartest Venture Capitalist In the World" - which was just confirmed by your #1 PrivCo Tech VC Firm Ranking and your exits record - tend to think two steps ahead. Not investing in what’s hot now, but two years from now. What do you see as “the next, next thing?"
SODHANI: Big areas for growth in the future that we believe in, if I had to choose, I would say are in speech and voice recognition technology and optical eye tracking. More computing horse power today means better eye tracking and voice recognition as these technologies continue to evolve. These technologies will work for consumers in the future, enabling electronic devices to sync with email and calendars and help simplify people's lives, like booking dinner reservations and doctor appointments. For example, your phone will recognize that you have a doctor appointment in your calendar and call your doctor to either confirm or cancel the appointment. Or, your device will recognize that you have been searching for restaurants, and suggest one that fits your tastes and then even book the reservation for you.
Expect Labs, which we invested in late last year, is one of these companies with the technology that’s going to be able to predict what you are going to do next. This is a very recent investment we made late last year and closed early January [2013]. Expect Labs offers a platform that utilizes voice recognition to analyze your calls and chats in order to intelligently provide a wide range of services. (PrivCo Note: This is exclusive new information given to PrivCo. Expect Labs announced a $2.4 Million funding in October 2012 that did not include Intel Capital. Intel Capital joined in an expansion of the round in January 2013 given its strategic value to Expect Labs.)
HAMADEH: Unlike many VC firms, you’re truly global (26 international offices with investments in 54 countries). How are your investments outside the U.S. different than those you’re making here.
SODHANI: More broad in scope, especially in very emerging markets such as Vietnam and Indonesia. We’re helping build an early-stage tech ecosystem, believing that these regions will develop key consumer and enterprise markets for Intel-powered products. Overseas, we are looking at investments that specifically encourage tech innovation and advancement, and we see opportunity in e-commerce, consumer internet, and travel sites.
All our overseas investments are strategic: over time, these investments will grow Intel’s business. These companies will grow to buy Intel products (i.e. processors) or integrate with Intel’s business down the road. Our favorite market right now to invest in is Turkey. We just opened our first office in Turkey, just moved one of our senior people there, and have already invested in two Turkish companies - Nokta [online media] and Grupanya [social ecommerce]. We expect Turkey to be a tremendous market for future growth that most other VCs are overlooking, and we look forward to expanding our VC investments there. We want to be the tech VC leader in Turkey.
HAMADEH: When you consider making a V.C. investment, what’s the one most important thing Intel Capital looks for in a company or its founders? An entrepreneur with a successful startup exit on his resume? One who has started a company and failed but learned important lessons from that? What is that one thing?
SODHANI: It’s all about the team. Specifically, the staying power and commitment of the Founder and CEO is a huge factor. We don’t want someone who won’t stick with it during the difficult bumps and drop out. We take into account how much passion and conviction the Founder/CEO has, but also consider how realistic they are in pursuing their passion. The Founders' passion and commitment matter more than the idea. There will often be pivots.
HAMADEH: So we crunched our VC data and found the top 4 VC firms that Intel Capital most often invests with. Here are the 4 VC firms you most often co-invested with for the last 3 years (2010-2012). [Hamadeh shows him the list: Cisco Systems, Crosslink Capital, Kleiner Perkins Caufield & Byers (KPCB) and QUALCOMM Ventures]
SODHANI: Recently, corporate venture arms such as QUALCOMM have shown up and in some cases are pursuing identical agendas as us. Cisco too. That will not prevent us from co-investing in a great deal, as your co-investing data shows.
HAMADEH: So what’s your next VC deal about to close. Give me a scoop, Arvind!
SODHANI: [laughs] Well I can't really give you a scoop, but we’ll make sure PrivCo is one of the very first to know the moment it’s announced....if not even slightly before.
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