Intel Launches New VC Effort

To complement the company’s launch of a new network platform, Intel Corp. in early September launched a $200 million venture fund dedicated to investing in voice and data communications deals.

The newly formed Intel Communications Fund will invest in companies developing software based on Intel’s new Internet Exchange (IX) Architecture, which allows operating systems designers to add new audio and visual communications functions. Such businesses include basic communications component manufacturers, real-time operating system developers and software tool providers.

The Intel Communications Fund is funded entirely by Intel – unlike the Intel-64 Fund launched last spring (PEW, May 17, p. 6), which included limited partners such as Hewlett-Packard Corp., Compaq Computer Corp., Dell Computer Corp. and NEC Corp.. While a company spokesman would not rule out the fund welcoming outside investors at some point, there are no immediate plans to do so.

“With this fund … the objective was to launch it as quickly as possible,” said Keith Larson, the director of corporate business development for Intel’s networking communications group and acting manager of the new fund. The company wanted to introduce the fund concurrent with the launch of its IX Architecture, he explained.

The $250 million Intel-64 Fund has made about a half dozen investments since its inception. Over the past decade, Intel has invested in about 275 companies, which were valued at approximately $3.5 billion at the end of June, the company estimated. Intel is one of the oldest corporate venture investors, having been joined in the last year by companies such as cable operator Comcast Corp., software developer Seagate Technology Inc. and computer manufacturer Oracle Corp.

The Communications Fund will make minority investments, typically less than $10 million. Intel’s venture investments historically have been in the $3 million to $5 million range. Larson noted that the company preferred to invest alongside professional venture capital firms.

The new fund had not made any deals by press time. Intel will appoint an in-house candidate as a permanent fund manager in the near future.