The rainmaker

Latin Trade, Jan, 2004 by Greg Brown

Carlos Kokron is director of strategic investments in Latin America for Intel Capitol, the venture capital fund of US. chip giant Intel Arguably the most active venture investor in the world, Intel Capital has placed more titan US$50 million into the region since late 1999, even as most investors fled technology start-ups. Kokron talks with LATIN TRADE Editor-in-Chief Greg Brown about what kind of company makes a good bet.

How does Intel choose a proposal?

We analyze companies the way any investor will. We look at the management team, we look at the market. Is the solution expected to grow, or not. We look at the exit strategies. The first question we ask, that a financial investor doesn't ask, is, if it succeeds, will it help grow the market for our products? Once we've asked that question, then we go into analyzing the project.

What types of companies do you like?

Intel Capital, on a worldwide basis, has a number of initiatives. They can vary from nanotechnology and low power displays to longer life batteries. Those things are all important to Intel, since they'll make handheld computers more available. In Latin America, we have been identifying companies that accelerate e-business. We're also very interested in this whole notion of mobile computing; we're really banking on mobile computing and communications. We're looking for companies that can bring the broadband Internet the last mile or the last few feet, like [high-speed wireless Internet standards] Wi-Fi or Wi-Max. That's interesting in that it brings broadband Internet to more people in a faster way. We're also interested in making broadband cellular more available [and] new functionalities like location-based services.

Does Intel eventually cash out of its investments? How does that happen?

We are long-term investors. We're not looking to make money in the short term. Our horizon is usually four years, five years or six years. We obviously want to make a lot of money, to justify the risk we took. We usually get out when the company is ready to be acquired or go public. Once they have access to other forms of capital, we think our job is done.

Is the Latin American talent pool deep enough?

I think the answer is yes, although there is lots of room for improvement, for example, in understanding what we call entrepreneurial culture. We find technical talent, and there is managerial talent. It's a process of marrying the two. Traditionally, however, folks graduate from school and they sign up with a big company. The vast majority of the entrepreneurs in the region are necessity entrepreneurs. It's a subsistence business or a lifestyle business, but it's not somebody eager to make a big impact or create a lot of jobs. However, we see the new generation interested in taking advantage of venture capital to grow their business.

Why do companies get rejected?

More often, we end up not investing not because the technical solution isn't there, but because there's not enough managerial talent.

Do you find you have more money than good ideas, or more good ideas than money?

At this point, we probably have more money. We'd like to invest more. On the other hand, we're quite happy with our results this year, and we'd like to build on them for next year. It's really not just good ideas, it's good investment ideas, which is different. It's not the best technology that wins, it's the best business that wins. Really, the most successful solutions are ones that address the market.

Why do small tech companies fail, in your experience?

I think it's many, many things. It's easier to say what they do right. Our business is to build companies [and] get companies to a certain stage. They can fail for a number of reasons: Their sales cycle is too long, they run out of cash. Or they're slow in building their product, and the competition is faster.

Okay, how do they succeed?

I think you succeed by having a flexible management team that is able to react as needed to changes in the marketplace. It's great to have a business plan, it's very important to have a business plan, but you need to react very quickly to market forces. A small shift here or there can be very important. The number one thing that can make or break a company is the management team. You have to have the guy who is technical, the guy who is more visionary, and the best manager, and they have to be building relevant products. In today's marketplace, building a nice feature isn't enough. It has to be mission critical, something people will treasure and say, 'I have to have this. I need this! And don't forget luck. It helps to be in the right place at the right time.