PC startups have good relationship with Intel

Intel may not be an angel in everyone's mind, but it bills itself as a divine hand anointing startups that turn to it for capital. And many entrepreneurs and investors in the computer industry agree.

"I don't want to sound arrogant but we offer a certain halo effect when a leading company in the business says `Hey, we think this technology is important and we think this management team may be able to do something interesting,'" said Leslie Vadasz, an Intel vice president who is in charge of its investments.

To date, Intel acknowledges making more than 100 investments, including acquisitions, amounting to "well in excess of" $500 million, according to Vadasz. But that could be just the tip of the iceberg; Vadasz acknowledged that Intel does not disclose many of its investments in private companies. A venture capitalist who declined to be identified said Intel has an army of roughly 70 people devoted to scouting out and securing investments. "Intel has the largest staff dedicated to investing in startups of any company I know," he said. Vadasz, citing competitive reasons, would not discuss the size of his team. Intel's investments are surprisingly varied. Their common denominator is that all in some way help fuel demand for computers and thus for microprocessors. It has made investments in areas ranging from chip technology to Internet payment systems to networking technology to 3-D animation. Despite its octopus-like reach into many sectors, Intel's objective of growing the PC industry appears unthreatening to most potential partners. "Intel's message is pretty cut and dry to a lot of startups," said Mark Gorenberg, a partner at Hummer Winblad Venture Partners, a San Francisco venture capital firm that has teamed up with Intel to invest in software firm NetDynamics, among other companies. He said Microsoft can also be a good partner for startups, by offering market clout and a huge distribution channel along with capital. "Both companies can help startups gain a foothold." Gorenberg noted that venture capitalists increasingly are turning to Intel and other high-tech companies either for their opinion of new business plans or for partnership in an investment round. Entrepreneurs interviewed by The Chronicle offered a resounding thumbs-up on Intel. "We were first very nervous about taking an investment from a corporate partner, especially because we're in a business of licensing our technology to many companies," said Louis Rosenberg, president of Immersion, a San Jose startup that makes joysticks and recently received a 5 to 10 percent investment from Intel. "But ... Intel is so neutral (that) it's never been an impediment to us. In fact, it's very positive to have some endorsement from Intel because they're so powerful in the industry ... And they give us insights so we can make sure we're on the right track." Granted, Intel is not perceived as such an angel on all fronts. Just ask the Justice Department, which is investigating the company's tactics in securing dominance in the microprocessor market, including rebates it gives to computer manufacturers that use the "Intel inside" logo in their advertising. But as an investor, Intel's record is strong. Another company in which Intel has an interest is Rambus of Mountain View, whose technology speeds data transmission between the processor and memory chips, letting the computer perform tasks faster. "We're very happy with the relationship with Intel. It's very mutual," said Subodh Toprani, a Rambus vice president. "We win if they help make us more successful in the PC marketplace. They win if their warrants are worth much more down the road." Intel acquired warrants that allow it to buy up to 1 million shares of Rambus, if Intel ships 20 percent of its memory control devices with Rambus' interface technology. Intel's Vadasz stressed that about anything that helps grow the computer industry is a candidate for Intel's investment. "We want people to help us create a bigger market, and new market segments," he said. "So we're looking to make money but we're also looking for what fits into our model strategically." Where might Intel make its investments next? Medical and educational technology and services, Vadasz said. "We are a pretty paranoid company," he said, noting that Intel is scrambling aggressively to stay ahead of the pack by making strategic investments in companies that bring technology to the market faster than Intel can on its own. "We work very hard to try to convince everybody by example that what we're trying do is a win-win equation. We're not trying to rob anybody of their opportunity, we're trying to help them. And that helps us."

Copyright 1997
Provided by ProQuest Information and Learning Company. All rights Reserved.