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Intel Capital invests $28 mln in five Chinese smart devices startups

Discussion in 'China & Far East' started by cirr, Oct 21, 2014.

  1. cirr

    cirr ELITE MEMBER

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    Intel Capital invests $28 mln in five Chinese smart devices startups

    BY MARK BOSLET

    OCTOBER 20, 2014

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    Intel Capital said it has put $28 million to work in five Chinese companies making new-generation hardware and related technologies, including wearables and Internet of things devices and components.

    The investments are the first from the organization’s newly created $100 million China Smart Device Innovation Fund and are designed to foster an ecosystem of smart device hardware, software and components companies in China.

    Chipmaker Intel, the parent company of Intel Capital, also has a Smart Devices Innovation Center up and running in Shenzhen focused on ecosystem development.

    The companies receiving money include EyeSmart Technology, which is developing iris-recognition technology; LeWa Technology, which is customizing the Android operating system for mobile devices; Shenzhen Fibocom Industrial Development, which is making communications modules for vehicles; Shanghai Ailiao Information Technology, which is developing communications technology for mobile gaming; and the smart watch company Guangdong Appscomm Digital Technology.

    The investments are early stage – a combination of A and B rounds – in companies that have shipping products and customers, said Intel Capital President Arvind Sodhani. “We’re developing the ecosystem,” he said.

    Intel Capital announced the smart device fund in April, its third China-focused fund, following the $200 million Intel Capital Technology Fund established in 2005 and the $500 million Intel Capital Technology Fund II, which was created three years later to invest in cloud, big data, data center and other companies.

    Sodhani said he expected to fully invest the smart device fund in three years and projected he would back a similar number of companies next year with perhaps a bit more capital. The ecosystem in China developing rapidly with a large addressable market, he said.

    Since 1998, Intel Capital has invested more than $700 million in more than 120 Chinese technology companies and achieved 30 exits. It presently has seven investors in China.

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    Intel Capital President Arvind Sodhani talks about his firm’s strategy of investing in Chinese startups, how the approach fits in with Intel’s core business, and the state of innovation in Chinese tech companies. Edited excerpts:

    WSJD: Why invest in startups in China?

    Sodhani: China is a very large market and ultimately will be the largest market for all these devices and services. It requires a domestic, Chinese-oriented approach. It’s very hard to bring external products to China, both from a user-interface point of view as well as a cost point of view. The cost structure in China is so much more competitive that we need locally developed, locally adapted solutions that are both from a consumers’ perspective as well as cost perspective, viable within China. The reality is that just bringing solutions from abroad or from the U.S. really can’t get much traction for the fact that one, the cost is very high so it has a very limited market potential. Secondly, the user interfaces tend to be not adapted to the way Chinese use the products. Thirdly, the talent is here, the skill sets are here to develop all these devices.

    WSJD: How does this fit in with Intel’s overall strategy? Will such investments help Intel not miss wearables the way it missed the move to mobile?

    Sodhani: This is furthering Intel’s strategic objectives and that is to create an entire ecosystem of connected and smart devices be they be connected cars, for example, or wearables, or Internet of Things, sensors, all of these are very large growth areas so we’re focused on building the ecosystem, building the building pieces, investing in companies that will bring the building pieces to make all of that happen. Certainly in wearables and Internet of Things, we’re very active in making sure we’re in front of the wave, so to speak, in all the applications that are going to use Internet of Things, wearables, and all the comms needed, all the apps that are needed.

    WSJD: How did you pick these companies?

    Sodhani: The vision of the founders, the management team, the dedication of the people that are driving these companies is critically more important to the long-term success to the companies than anything else. We look at the lifecycle of the product, we look at the (total addressable market) the product is likely to be addressing… we look at whether the product is disruptive… For example, EyeSmart, LeWa, can be very disruptive. EyeSmart will provide multifactor authentication, so they will provide one more way to authenticate yourself before you do, for example, a financial transaction. LeWa could be an (operating system) user interface that will allow device manufacturers a unique interaction. Right now, the interaction is all the same. LeWa could allow device manufacturers to provide a unique, a different interaction that is customized to their own needs.

    WSJD: What are your thoughts on the state of Chinese innovation?

    Sodhani: We’re clearly beginning to see Chinese-based solutions, Chinese-based products aimed at Chinese customers, not necessarily based toward export markets and, or serving other needs globally… that’s very exciting because this is exactly the kind of ecosystem that we need to build in China, and promote in China. … Certainly these companies will have the opportunity and the ambitions of addressing a global marketplace. Emerging markets would probably be their next target… because they can be very competitive in those markets. It wouldn’t surprise me, and I’m fully expecting that most Chinese companies will have global presence as they continue to build their base and their products in China.