In January, Wendell Brooks takes over the presidency of Intel Capital, replacing Arvind Sodhani, who is retiring after 35 years. An engineer and a former investment banker, Mr. Brooks will oversee one of the largest corporate venture arms in the world in addition to Intel’s Mergers and Acquisitions unit.
In an exclusive interview, he spoke to reporter Deborah Gage in San Diego, where about 1,200 of Intel’s executives, portfolio companies, partners and customers have gathered for the annual Intel Capital Global Summit.
This interview has been edited for clarity and length.
Q: Earlier today, you compared Intel to the Medici family. You’re not the first person I’ve heard make the Medici comparison, although it was with Silicon Valley and not Intel.
A: It is the same as an artist going and being sponsored by the Medicis. I’m a frustrated engineer, and chance to go to the world’s greatest engineering company and play a role, even if it’s a more financially driven role, is and was incredibly appealing to me. I didn’t think I’d be able to look myself in the mirror going forward if I didn’t take that leap and get the frustrated engineer out of me.
Q: You were trained as an engineer, but you made the decision to go to the financial side fairly early.
A: Yes, I was working for the Whirlpool Corporation back in the late ’80s, and we got into a bidding war with General Electric for a company called Roper Appliances. I got the chance to work with a bunch of investment bankers in that transaction process and pretty quickly decided that there was more opportunity for career progression on Wall Street than there was working as an industrial engineer. On some level greed took over, and at the same time I never really forgave myself for letting greed take over, and the chance to get back and work in an engineering-driven culture was very attractive to me.
Q: How do you like your role now?
A: I love coming to work every day. I literally feel like I’m 20 years younger, I’m energized by the job. The whole culture speaks the same language I do. I love the idea of putting a hypothesis on the table and having an open and productive debate about the hypothesis, correcting it and amending it as necessary and coming to the best answer for Intel. I’ve met more people internally that bleed Intel blue and want to attack problems the same way as I do, all for the Intel good as well as the public good, and having an open and constructive debate that isn’t personality-driven like it might be on Wall Street, but is really testing the hypothesis as you would under the scientific method.
Q: Talk about why Intel made the move to integrate M&A and Intel Capital–and R&D maybe plays a role in that too.
A: I really think of the world at Intel as a triangle of growth. At the top of the triangle is R&D, where we are spending $12 billion a year…pursuing new technologies, new business models and new processes that will drive our growth going forward. Any time we can succeed with internal R&D, we own all the IP and own the go-to-market and we’re able to benefit the most from the success of those types of investments. So they’re our highest internal rate of return when we succeed there.
Secondarily we have Intel Capital, which is out looking for opportunities and spaces that R&D or the current business units aren’t necessarily touching every day, but are very much aligned with the direction that those business units are going. We’re placing many bets, and we’re getting across the portfolio the benefit of financial return, and we’re getting insights into the disruptive technologies that will touch all of our lives in the future. So I would look at Intel Capital as our second most efficient cost of capital if we look at capital on an internal basis.
Mergers and acquisitions and licensing deals are there to clean up in areas where we haven’t had success in internal R&D or through investing. They’re going to be the most expensive form of internal capital because we’re buying leadership positions in spaces that we didn’t develop ourselves.
I look at Intel Capital and M&A that both report to me as very complementary, but there’s a need to keep them very distinct. The mergers-and-acquisitions team has to be fully aligned with our business units, understand and help them develop their strategy and then execute on that strategy, whereas Intel Capital has to know that strategy, understand that strategy and take bets that are not necessarily 100% aligned with the direction the business unit is going, so that we have different perspectives and some hedge to the direction of the business unit. One of my missions going forward is to make sure that cooperation and collaboration between M&A, Intel Capital and the business unit works better and more efficiently because that will really drive growth for us.
Q. You’ve talked about the need to successfully integrate acquisitions. Talk about organizational changes you’ve made at Intel since you came.
A: When I arrived, the M&A business development team had 54 people in it. Fifty of those 54 were front-end focused M&A business development executors. They were and are incredibly efficient at valuation, negotiation, contract documentation, due diligence and getting the transaction done, and we had four people then focused on making sure those acquisitions got integrated into Intel.
I lived my whole life on Wall Street on the front-end side of M&A making recommendations and helping people get transactions done, and one of the more intriguing and appealing parts of coming to Intel was to actually live with and own a transaction after we bought it, and to make sure it works. I would say a really good corporate is successful in 50 to 60 percent of deals that they do, and I always found that statistic very frustrating.
I’ve taken a focus in both expanding the number of people I have focused on integration at Intel and expanding the roles they’re playing in that integration. When we buy a company, we buy it with some thesis on how we’re going to create value. If you buy the company and immediately fully integrate it into a business unit, you lose track sometimes of that value thesis.
So we are now taking an individual person for each substantive deal we do, and assigning them to the transaction for 18 months to two years after we close the deal. They are in that role, the chief of staff to the incoming CEO and management team. They are there to make sure there’s open lines of communication in the informal networks that exist within any major company, they are there to help make sure we meet and follow the deal thesis we bought in on in the beginning, and they’re also an early warning signal back to me if there are problems we know about in either bringing those people into Intel or following up on the economics we thought we were getting.
Q: Some of the Intel folks have said to me that Intel under CEO Brian Krzanich has a more technical focus for investments. I wondered if you agree with that and if you had any comment.
A: I wasn’t here before so I don’t have perspective, although Brian tends to ask me in every transaction I undertake, whether it be equity investing or M&A, do we understand the technology or have something to add to the technology in making the investment…and I think that he has a depth of knowledge and experience and a commitment to making sure we are optimizing the investments we make by using our technology or gaining new technology. So I can’t speak to history, but I can speak to now and looking forward. It’s very much a focus in everything we do.
Q: Do you have particular priorities of your own, either on the financial or technical side, for investing going forward?
I’m really committed to new growth businesses at Intel. I think we continue to see compute going to the edge of the network and compute going to the cloud. When I look at advanced driver assist systems–coming from Michigan, cars are a passion of mine–I look at what the connected car can really mean, whether it’s my car is talking to your car or talking to a street light that’s about to change or talking to a truck that’s about to get off at the next exit, and knowing what everyone else on the road is going to do to provide incremental safety notices to you even if we don’t get to completely automated driving. The amount of compute and systems that go into a car and the amount of connectivity in the car and other infrastructure and automobiles is a tremendous opportunity for us and for all of our competitors.
I get very excited about computer vision, I get excited about our 3-D camera technology, I get excited about what you’ll be able to do in the car today that you’re not able to do. You’re already seeing verbal texting applications, voice recognition in the car, lane monitoring. I think there are areas that are going to be completely redefined by technology and user experience and that’s one of my favorite ones, and I’m continuing to drive both M&A thinking and investing thinking around getting the most of those opportunities.
Q: You talked today about wanting Intel to lead more investments. Why?
A: I think the value proposition we bring to bear is different than a standalone venture capitalist. I think we are much more able to help an early-stage entrepreneur develop a business thesis that you can take to market faster and with better technology than you can get in a standalone VC. I feel like there’s more opportunity for us to play a leadership role in sourcing deals and bringing in teams of other investors that will add and complement what we do and drive the go-to-market faster than they might otherwise get in a standalone venture capital round financing. And in many cases being first to market–that first-mover advantage–is as important as intellectual property.
Q: Are you trying in general to get into deals earlier than Intel has in the past?
A: I think we will continue to try and play relatively evenly at all stages. The reason I talk about the dollar amount on average being invested going up [is that] I think we have in later-stage rounds tended to be more followers than leaders. So the real change will probably be when we do C and D rounds, we will try to put more money in and exhibit some level of leadership role rather than just being a smaller, passive investment in a later round.
Write to Deborah Gage at firstname.lastname@example.org. Follow her on Twitter at @deborahgage