Intel Holds Its Own in the VC Game –

It’s been said that corporate venture capital groups can’t play serious venture capital, just like “white men can’t jump.” But if you see Intel Capital step onto the court, you’d better not let your guard down. This corporate VC’s got game.

VCs who have co-invested with Intel Capital praise the group’s commitment to the venture business during today’s rocky times.

Shifting Sands

“Going in, we were skeptical about having a corporate VC as a partner in a deal they are notorious for shifting like the sands,” says David Spreng, managing general partner at Crescendo Ventures, who co-invested with Intel Capital in laser module provider Novalux Inc. “One of the most important things of all in a partner is stability, and Intel has proven they are in it to stay.”

The same can’t be said for other large corporate venture groups. Lucent Technologies sold its New Ventures Group’s portfolio to secondary player Coller Capital earlier this year, and it halted new investments by Lucent Venture Partners.

Not only is Intel Capital stable, it has an intimate understanding of the venture business, which can’t be said for all corporate VC groups. That makes collaborating with Intel easy, says David Ladd, a general partner at Mayfield. He has co-invested with the venture group in four companies, including LGC Wireless Inc., Teja Tech-nologies Inc. and Wave-Splitter Technologies Inc. He declines to name the fourth, except to say that it’s developing methanol fuel cells that could power laptops. (PolyFuel seems to be the only company in Mayfield’s portfolio that fits the description, but Intel says it hasn’t invested in the startup.)

The biggest reason VCs like to co-invest with Intel Capital is for the doors it can open for developing companies. An investment from Intel Capital got Oxford Bioscience Partners’ portfolio company Zone Labs Inc. an introduction with every relevant business group inside Intel Corp.

Pleased to Meet You

Being introduced as an Intel Capital portfolio company increased Zone’s visibility greatly with those business groups, says Zone CEO Gregor Freund. The company, which develops network security products, is well on the way to entering into strategic partnerships with different groups within Intel, he says.

Network software maker IP Infusion Inc. has benefited tremendously from Intel Capital’s investment, says Bill Tai, founder of Authentic Ventures and a partner at Institutional Venture Partners.

Winning Feeling

“Intel entered the network processor business a little while ago and now has had 175 design wins in over a year,” Tai says. “For IP Infusion this has meant instant access to customers.”

Intel also showcased IP Infusion in its demo booth at various networking conferences. “This demonstrated IP Infusion as the routing platform of choice for Intel network processors to Intel developers,” Tai notes.

Not every VC is blown away by Intel Capital. “With corporates it is always a mixed bag,” says Harry Edelson, founder of Edelson Tech-nology Partners, a firm whose limited partners are corporations. Edelson, who has never done a deal with Intel Capital, warns that if corporate investors “lose interest in a company, they will abandon it, even if they have put a lot of money into a company.”

Indeed a Northeast-ern VC who has done a couple of deals with Intel Capital, says the venture group has acknowledged to him that it will invest early but that doesn’t necessarily mean it will participate in later rounds.

The possibility of a conflict of interest can also make working with Intel difficult, some VCs say. “It really depends on how close the strategic fit is – with Intel or any corporate investor,” says Steve Baloff, a general partner at Advanced Tecnology Ventures. “If the fit is too close, you may get some asymmetries in the relationship, where the corporate investor isn’t necessarily thinking about what’s best for the company.”

Labor Pains

A Silicon Valley VC who asked not to be named says that collaborating with Intel Capital can be “somewhat laborious,” and it really depends on the individual you’re working with.

“It can be more or less comprehensive depen-ding on what Intel is doing in a specific sector,” he says. “If they have no presence in an area and they want to get one together quickly, it may go much easier. If they already have a presence, it may slow down because more and more people get involved.”

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