Intel Capital going slow on India start-up investments

The move is in line with Intel Capital’s overall strategy of restructuring, where it has decided to slim down operations


Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint

Mumbai: Intel Capital, the venture capital investment arm of chip maker Intel Corp., is going slow in investing in Indian start-ups as part of a change in strategy, said two persons aware of the development.

“The move is in line with the company’s overall strategy of restructuring, where it has decided to slim down operations,” said one of the two persons, requesting anonymity as he isn’t authorized to speak to the media.

The US will continue to be a prime market for Intel Capital, which has decided to apply the brakes on investments in some markets, including India, this person said.

Intel Capital’s investments include e-commerce firm Snapdeal, online travel agency Yatra Online Pvt. Ltd and on-demand entertainment firm Hungama.

Intel Capital has invested in three Indian companies this year—Hungama, Helpshift and IndiaMART.com. All three of these investments were follow-on investments. Intel first invested in Hungama in 2012, Helpshift in 2014 and IndiaMART in 2009.

The move comes at a time when globally corporate venture capital (CVC) activity hit a nine-quarter low, according to the US research firm CB Insights.

Global CVC-backed deal activity fell 11% to 298 deals in the second quarter of 2016, compared to 335 deals in the previous quarter. Overall funding from deals with CVC participation fell 41% to $4.7 billion in Q2 2016, compared with $8 billion in the previous quarter, according to CB Insights.

In India, however, the number of deals doubled and amount of funding rose five times in the second quarter on a sequential basis to 13 transactions worth $171 million, the report said.

According to the second person cited above, all members of Intel Capital’s six-member India investment team have already quit, barring Amit Behl, who will be responsible for portfolio management.

At the end of August last year, Sudheer Kuppam, who was India and Asia-Pacific managing director for Intel Capital and heading its India operations, left to set up his own venture capital (VC) firm, Epsilon Venture Partners.

“They are down to one person in India. They haven’t done any new deals in the last three years. They have been doing follow-on investments and are being very selective about it,” said the second person cited above.

Intel Capital said it continues to support its portfolio in India through its investment manager.

“We’re looking for new investment opportunities. If we find good opportunities meeting our strategic and financial requirements, we will invest,” said a spokesperson for Intel Capital in an email response.

Bloomberg reported in March that Intel Corp. was planning to sell part of its venture capital unit, assets that could be worth as much as $1 billion.

The Santa Clara, California-based company is working with UBS Group AG to look for potential buyers for the assets, Bloomberg reported, citing people it didn’t identify.

“Their model has imploded globally. It’s very difficult to get investments which match both strategic and financial requirements,” said the first person cited above. “In most cases, it’s like a pendulum depending upon the orientation of the company—at times they are more financially oriented and at times more strategically oriented.”

In a newsletter in May, Wendell Brooks, president of Intel Capital, wrote that the investment firm was rethinking its team’s structure, and as part of the process, some team members would be shifting roles, and a few, leave.

The restructuring is aimed at streamlining Intel Capital’s investment process and to give its portfolio start-ups more exposure to the breadth of Intel’s business units, he wrote.

In 2015, Intel Capital made 64 investments in new companies and 79 follow-on investments worth a total of $514 million across 30 countries, according to details available on its website.

The venture capital firm had 26 successful exits last year.

Intel Capital is not the first global venture capital firm to scale down its Indian operations or quit the country.

In May, The Economic Times reported that VC firm Draper Fisher Jurvetson (DFJ), an investor in companies such as Elon Musk’s Tesla Motors Inc., social networking platform Twitter Inc. and Internet communications firm Skype Inc., had sold nearly its entire India portfolio to the Hong-Kong based NewQuest Capital Partners, after a three year hunt for buyers. The VC firm had around 8-10 investments in India.

In 2014, another storied Silicon Valley venture capital firm, Kleiner Perkins Caufield & Byers, along with Sherpalo Ventures, sold its India portfolio of six investments to Lightbox Ventures, a venture capital firm started by its former local representative Sandeep Murthy.

In 2015, Canaan Partners sold its India portfolio of nearly a dozen companies to JP Morgan Asset Management in a deal pegged at about $200 million.

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