SANTA CLARA, Calif. – In the latest example of a technology corporation establishing a venture fund to complement its main businesses, Intel Corp. raised $300 million to support developing companies that use its IA-64 processor.
While companies like 3Com Corp. and Seagate Technology Inc. (VCJ, June, page 5) have established similar venture funds to bolster research and development efforts, the motivation of The IA-64 Fund is to build bridges between Intel, its partners and emerging information technology companies.
“The purpose of the fund is to bring together all players around the emerging technology and have a dialogue on how to create product served by IA-64,” said Lila Partridge, director of Intel’s corporate business group.
In addition to the $100 million committed by Intel, the company brought in $200 million from computer hardware manufacturers, technology customers and financial service providers. Limited partners include Hewlett-Packard Corp., Compaq Computer Corp., Dell Computer Corp., NEC Corp. and Silicon Graphics Inc.
Morgan Stanley Dean Witter placed the fund with non-hardware manufacturer limited partners such as BankAmerica Corp., General Electric Co., Ford Motor Co., Circuit City Stores Inc., Reuters Group PLC, The Sabre Group, Sumitomo Corp., SunAmerica Inc., McKesson HBOC Inc. and Telefonos de Mexico. Intel will encourage its limited partners to co-invest with the fund.
“When you look at the hardware investors, their interest is a function of what their technology is,” Ms. Partridge said. “Many chief information officers representing our other investors came in very much wanting to know what is coming down the pipeline.”
Intel also retained Jim Breyer of Accel Partners and Rick Kimball of Technology Crossover Ventures as outside consultants who will monitor early-stage investment opportunities.
Intel will invest in companies at the seed level all the way through to initial public offerings, Ms. Partridge said. She added that although the fund has no minimum investment amount, it will invest between $3 million to $5 million in most companies in the next three years. Intel has little interest in taking a controlling position in its portfolio companies.
“I don’t envision a situation where we will make acquisitions, but I cannot speak for our partners,” Ms. Partridge said.
In addition to providing capital, Intel will offer its portfolio companies technical support and sales and marketing services.
Intel previously has invested $300 million dollars in more than 100 companies through its corporate business group. The IA-64 Fund is the first time the company has allocated an entire fund for a specific silicon figuration.