Intel, partners to give $3.5 billion to tech startups

by Andrew Johnson - Feb. 24, 2010 12:00 AM
The Arizona Republic

Intel Corp.'s plans to direct $3.5 billion of investments into U.S. technology companies could help cash-strapped startups in Arizona, where venture-capital activity is lagging.

The Santa Clara, Calif.-based semiconductor giant said Tuesday that its venture-capital arm, Intel Capital, was forming a $200 million fund to focus on domestic companies developing "clean" technology, information technology and biotech.

None of the money Intel plans to invest is earmarked for specific states. But the computer-chip maker's huge manufacturing presence in metro Phoenix and the ties many of its partners have to the local startup community could help keep some of that money in Arizona.

Entrepreneurs say the funding is sorely needed in Arizona, where the amount venture capitalists invested in local companies fell 45 percent in 2009 to $115.6 million.

Intel, along with the 24 venture-capital firms it's partnering with as part of the Invest in America Alliance, intends to invest $3.5 billion in U.S. companies within the next two years.

Intel also announced that it and 17 tech companies, including Cisco, Dell, eBay and Google, are committed to hiring more college graduates.

The investments are meant to help increase the country's technological competitiveness, said Amy Kircos, an Intel spokeswoman in Chandler.

"Each company has given a good-faith commitment, if you will, to invest a certain number of their dollars in the U.S.," she said.

Venture capital is money investors provide a business typically in return for a stake in the company. The money helps startups pay for research and development, product marketing and hiring.

Intel employs about 9,700 workers at its wafer-fabrication campus in Chandler, the second largest of its seven U.S. manufacturing sites.

A handful of the two dozen firms partnering with Intel have invested in Arizona companies in the past decade, including Canaan Partners, Kleiner Perkins Caufield & Byers, and Mohr Davidow Ventures.

Kleiner Perkins invested in LifeLock Inc., a Tempe-based provider of identity-theft protection products that many tech watchers expect to go public this year.

Mohr Davidow invested in Gilbert-based marketing-HYPERLINK \l ""software developer Infusionsoft.

"The goal is really to create jobs as well as invest in these tech companies," said Yasine Armstrong, an associate with Flywheel Ventures in Albuquerque.

Flywheel in 2007 invested in 4Blox Inc., a storage-software developer that was spun out of Arizona State University.

Dan Mahoney, an attorney with law firm Snell & Wilmer LLP in Phoenix who specializes in investment deals, wrote in an e-mail that Intel's plan provides a capital source that is "ready, willing and able to be deployed."

"If those funds that have been active here or are willing to be active here have the ability to tap into new sources of capital then that will mean more opportunities for (Arizona) companies to find that money," Mahoney wrote.

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