Creating Your Exit Strategy and Exit Goals
Case In Point: Intel Capital
Your exit strategy is important because it helps you define success in business. When entrepreneurs have not thought through an exit strategy, it may be an indicator that they are not focused on the eventual transition of the venture. There is a saying among venture capitalists, “It’s easy to get into an investment, but how do we get out?”
And investors do not want an exit strategy to be difficult or bloody. In essence, having a harvest goal and a strategy to achieve it is indeed what separates successful entrepreneurs from the rest of the pack.
Les Vadasz, an entrepreneur at heart, left Fairchild Semiconductor in 1968 to help run a high-tech startup called Intel Corporation. He was hired as employee number-four. In 1991 he started up a corporate venturing program that became Intel Capital. At first, they began investing and nurturing a few private ventures whose products and services helped fill in the gap in their own product line, capabilities and capacity. But their plans soon grew beyond that goal. They did 50 deals in their first year. By 2002 they were investing anywhere between $1-10 million per deal.
Intel does not typically lead the deal. Instead it co-invests with other venture firms and takes an active role in assessing the technology potential of start-ups. By fall 2002, Intel Capital had made some 475-500 investments and their portfolio was valued at $1.7 billion. In 2002, Intel Capital was ranked as the top investor in information-technology start-ups and the second-largest investor in start-ups overall. They have a global perspective; nearly 45% of its investments were in 31 countries outside the US.
Kirby Dyess, vice president and director of operations for Intel Capital, managed the successful integration of Intel’s mergers and acquisitions. At one time there were more than 300 people working at Intel who did nothing but facilitate acquisitions and help integrate the new ventures into Intel. In 1999 Intel closed 14 acquisitions for about $6 billion and in 2000 they closed 15. About 80% of the ventures Intel acquired were introduced to them through financial intermediaries and investment bankers. Although most of details behind Intel’s venture group and acquisition activities are not publicly known, some of their largest publicly known acquisitions ranged from $2.2 billion for Level One Communications in 1999, and also Xircom for $748 million in 2001.