Intel Capital plans to boost auto research in India with $100 mn fund

Mumbai: Intel Capital, the venture arm of Intel, plans to support Indian entrepreneurs developing new technologies for cars with its new $100 million Connected Car Fund.

Indian companies will benefit from this fund as they are known for innovation, said Sudheer Kumar Kuppam, managing director, Asia Pacific, Intel Technology India Pvt. Ltd. “We anticipate that Indian companies will contribute to international chip designs that can augment the connected car business,” Kuppam said, adding that the fund has already started scouting for investment opportunities in India.

The Intel Capital Connected Car Fund, launched on Wednesday in Santa Clara, California, and Karlsruhe/Feldkirchen, Germany, will invest globally over the next four to five years in hardware, software and services companies to promote new in-vehicle applications and enable seamless connection between vehicles and any linked device, including mobile ones and sensors.

“The car is the ultimate mobile device,” said Staci Palmer, general manager of Intel’s Automotive Solutions Division. “By 2014, automobiles will be among the top three fastest-growing areas for connected devices and Internet content.”

Intel already has partnerships with leading car makers, including Hyundai Motor Co., Kia Motors, Toyota Motor Corp., BMW AG and a few Chinese manufacturers for using its technology.

There is potentially a big market for new automobile technologies, said an April 2011 report by Cisco’s Internet Business Solutions Group (IBSG).

If the automotive industry could build on what smartphones did for the phone industry, cars would become “personal digital assistants (PDAs) on wheels,” and could evolve into personal gadgets, outstripping smartphones or tablet PCs, according to the IBSG report.

The advent of vehicle connectivity opens up completely new service and pricing options for automotive manufacturers with an estimated revenue potential of $680 per vehicle per year, IBSG said.

The report cited a few examples of cars without drivers. In 2010, for instance, Google Inc. demonstrated a driverless Toyota Prius while an unmanned Audi climbed Pikes Peak mountain in Colorado. Fiat, Volkswagen and Hyundai have evolved similar technologies, it said.

The automobile electronics market is a large one globally, said Alok Mittal, managing director of Canaan Partners India, a technology focused venture capital fund. “India is a big market for such offerings and also has a big export potential. A local innovation could have a big gain,” Mittal said.

Intel Capital, which invested $56 million across 17 transactions last year, is hopeful of striking a few new deals and making some exits this year. Multi Commodity Exchange of India Ltd (MCX), one of its portfolio firms in India, came up with its initial public offer recently. The fund isn’t exiting the exchange.

“A few of our companies are in discussions for acquisitions,” said Kuppam, adding there are investment opportunities in the cloud computing space, besides information technology for education and healthcare, software services and audio-video streaming platforms.

However, high valuations of start-ups in India deter global investors, according to Kuppam. “With high valuations, returns potential goes down,” he said. “There are 40 active venture capitalists in India and if you want to sustain them, the market needs to generate better returns on exiting the portfolio.”

deepti.c@livemint.com