Interview with Jim Huston of Intel Capital

BizPlanIt recently spoke with Jim Huston, Director of Strategic Investments and Acquisitions for Intel’s Communications Product Group, to gain his insights into business planning, raising capital and launching a successful venture. Mr. Huston and his team are responsible for all equity investments, acquisitions and intellectual property licensing for Intel’s Communications Product Group.

BizPlanIt: Mr. Huston, thank you for your time. Please give us a little background about Intel Capital.

Huston: Intel Capital has been involved in private investments since the early 1990's, but we really began ramping up the practice in the mid 90's when we recognized the Internet explosion was about to take place. We recognized a tremendous opportunity, and wanted to help shape how that revolution would unfold.

BizPlanIt: What type of investment opportunities does Intel Capital typically get involved in?

Huston: Our focus has changed over time. In 1995-96 we were involved in areas aimed at creating new uses for, and users of, the Internet. We were also involved in some 3-D technologies. By 1997-98 we began looking at various broadband enabling technology investments, something we are no longer involved in. In the past couple years we’ve been involved in numerous international deals, many of which we would never touch here in the US. Our biggest investment area today is centered on our $500 million Communications Fund. We currently have more than 60 companies in that fund.

BizPlanIt: Tell us about your investment strategy and how it ties into Intel’s overall operational goals.

Huston: Each of our investment funds is tied together with a unified theme or message. All of our investments are conducted to create opportunities for Intel’s core business activities. Much of our focus today is on the communications business, whether at the systems level, a software level or at the chip level. Those are certainly the big growth areas for us.

BizPlanIt: Communication and telecom have come to the investment forefront recently, but a few years ago DotCom was the rage. Did you guys travel down that road?

Huston: We did some early DotCom investing in 1995 and 1996, but by 1997 we were pretty much out of that game. A few examples: We invested in GeoCities, because we perceived it to be one of the first enablers of communities on the web. We exited when Yahoo acquired the company. We invested in Broadcast.com and did very well when they were acquired by Yahoo. Overall we did about 30-40 of what might by called DotCom type deals. Many of those companies went public or were acquired allowing us to exit before the bubble burst, and very few are in our portfolio today.

BizPlanIt: How many business plans does Intel Capital see each month?

Huston: We have over 200 plans submitted each week directly through our website. We receive many more each week by people who submit their plans directly to our 100+ dealmakers.

BizPlanIt: When you look at a business plan, what might make you immediately decide that it’s not for you?

Huston: There are a couple key things that immediately prompt us to toss plans out. First, is there a strategic fit? Which is often a difficult thing for entrepreneurs to understand. They may assume that if they can help sell more PC's, then it’s an automatic strategic fit. However, that’s not always the case. Strategic fit is a moving target for us – not a snap shot. Just because we did a certain kind of deal 3 years ago, doesn’t mean we would consider another one like it now. And if we did a specific deal yesterday, it doesn’t necessarily mean we are interested in doing another one like it today.

BizPlanIt: I understand that you train the team at Intel Capital about how to read business plans. Can you tell us about that?

Huston: Over the past year and half we decided there was a need to build in some infrastructure, including training on business planning. Last summer I visited Amazon and found 300+ books about writing business plans, but nothing about effectively reading or using them. We decided to develop an internal training tool to teach the skills of how to read and use a business plan.

BizPlanIt: What are some of the top things you suggest to do when reading a business plan for a potential investment?

Huston: First, I tell our people to always read the executive summary and then skim through the rest. I suggest spending very little time on the actual numbers themselves. But instead to focus on the assumptions that went into developing those numbers.

BizPlanIt: There’s always been some debate about how long a business plan should or shouldn’t be, and how much detail to include. Investors can send mixed signals – sometimes requesting detailed information about strategies and other times wanting just a short executive summary. What’s your viewpoint?

Huston: We typically prefer a 2-3 page executive summary and PowerPoint presentation. When we train our people, we tell them to think of the plan as the document to use for further discovery with a company. There are things in there that aren’t flushed out, but they can be viewed as a guide for due diligence when we actually meet with a company. A business plan is a sales tool, and I try to educate our people to recognize that.

BizPlanIt: Many entrepreneurs starting out often struggle with the concept of assembling a management team before they get funded. What would you suggest an entrepreneur do in this situation?

Huston: First, I would tell them to find some advisors with credibility, whether they be technical or non-technical. Find advisors who are willing to step-up and speak with potential investors, because they will get a phone call before an investment is made. Obviously the better the team is the better chance you have.

One of the things that turns me off is when a team of entrepreneurs come together and seem to have gone around the room to assign titles. You get a sense they sat down at a table one day and said, "Well, I took an accounting course in college so I’ll be the CFO." That really doesn’t cut it. If it’s an important position to fill (and it may very well not be at that stage of the company life), then they need a true CFO.

BizPlanIt: Entrepreneurs often understate certain factors in a business plan. For example, they may dramatically understate the potential competition. Any thoughts?

Huston: Serious investors that read your business plan are not going to let you off the hook if you state you have no direct competition or that it’s a totally new market. You should deal with issues openly and honestly in the business plan you lay out. "Here are the six competitors and here’s what they do, etc." You have to assume that investors, especially the good ones, are going to follow through and check into the competition. You need to be objective, but also outline why you will be able to beat the competition. That doesn’t necessarily mean you are better than them today. The tendency is often to brush these kinds of issues under the rug, but it won’t increase your chances of getting funded – in fact, it may blow any chance that you do have.

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