SCHAUMBURG, Ill.- Rud Istvan has a new title and $50 million burning a hole in his pocket.
Christened the “general manger for future businesses” at Motorola Inc. late last summer, Istvan’s job is to invest in young companies that will provide good returns, plus some strategic benefit to the suburban Chicago telecommunications company. Istvan, who previously worked as Motorola’s corporate director of strategy, took over the company’s venture operations two years ago.
Motorola is no newcomer to corporate venture investing, having made direct investments for decades, and Istvan has been charged with significantly ramping up the company’s activity. He is not just on the lookout for companies to back; he also is searching for good technologies that could be incorporated into a company Motorola would create – something akin to an incubator.
The goal is to invest $50 million a year, but that is not the upper limit. “If I need more, I go get more,” Istvan said.
Istvan said the company increased its interest in venture when it began to study its main businesses a few years ago, making it easier to select good investment candidates that would provide “equity-plus” benefits. Successes over the last two years were encouraging, and with so many corporate venture investors entering the mix, the company wanted to remain competitive.
Motorola does not back venture capital funds because the blind pool approach is not conducive to the strategic gains sought through direct investments. Istvan and his team are expected to match the returns of any other Motorola effort, which means reaching in the teens or 20s.
Thanks to two recent wins, returns have exceeded several hundred percent, Istvan said. Motorola invested in Broadcast.com, which shifts local radio to the Internet and was sold to Yahoo Inc. for $5 billion this past summer. The telecommunications company also backed Online Anywhere, which lets wireless devices read Web pages without prior re-coding of the sites. Yahoo also bought the company for $80 million in Yahoo stock, Istvan said. Motorola has no constraints on its investment size, stage or geographic focus, but Istvan’s unit must seek companies that enhance Motorola’s larger businesses. That boils down to embedded electronics – not just semiconductors – and telecommunications, which is more than just wireless devices, Istvan explained. The group also has a separate life sciences unit that reports to Istvan and invests in, for example, biochip systems companies, which use microchips to analyze biologic data.
Most traditional, independent venture firms are unfamiliar with Motorola’s investment efforts, Istvan said, but entrepreneurs appreciate his group for the access it can provide to Motorola’s technical expertise, its assistance with issues such as automation and its long-term investment strategy. “The reason they like us is we’re patient investors. We’re not in it for three years and a flip,” Istvan said.
In addition to stepping up its life sciences activities, Motorola will increase its attention to energy-related companies. Portable devices, such as Motorola’s portable phones, need rechargeable battery cells, and the company is interested in seeing the technology improved.
Unlike more passive corporate investors, Motorola generally takes board seats on its portfolio companies, and the company will invest alone or as part of a syndicate with other venture firms. The corporate investor relies on a network on international scouts for deal flow. “We’re not taking a shotgun approach. It’s not just dot.coms,” Istvan observed.