By Andy Gordon on May 27, 2013 Dear Early Investor,
Last week, I told you that an American manufacturer has figured out an extremely profitable way to invest in startups. Today, I'm going to tell you what company that is and how it pulls it off.
I wish I could tell you it involves a secret you can easily copy. Sorry, successful startup investing can't be reduced to a single unknown ingredient.
But it's no accident that this company has achieved the success it has. It had more exits in 2013 than SV Angel, Greylock Partners and Sequoia Capital, all tremendously successful VC investors.
This company makes chips, some of the best chips in the world. You've probably heard of it.
It's Intel.
Intel's Other Talent: Early Investing
Intel finished first in terms of number of startup M&A exits in 2013. Here's a chart listing the top 10...  Intel had 22 M&A exits, says VentureBeat, using data from PrivCo. Second-place finisher SV Angel came in with 18 exits. Another non-VC company, Google, was 15th. It had seven exits.
You can see even higher numbers at Intel's own website. It lists 27 M&A exits in addition to six IPOs (from Japan, Taiwan and the U.S.).
Intel is a huge believer in startups. In 2013 alone, it made 146 investments worth $333 million. 63 of them were with new companies. The remaining 83 were with startups it had invested in previously.
This is well-trodden territory for Intel. Since 1991, it has invested in 1,340 companies from all over the world. Total invested: $11 billion.
More than 200 of those companies have gone public to date. Another 340 were bought out or participated in a merger. The math...
More than 40% of Intel's portfolio has resulted in a liquidity event. Minus the 63 companies that entered Intel Capital's orbit in 2013, the percentage climbs to 42%.
That's mighty impressive.
Intel has ranked No. 1 on this list for three years running. The sheer scale of its efforts along with a 40% liquidity success rate is a tough combination to beat.
The company's global reach, global network of customers and decision makers, and technology expertise drive its success.
It also sticks to what it knows best. It has targeted 10 technologies, many of which may be familiar to you: wearables, security, datacenter-cloud-network, the Internet of Things and smartphones/tablets.
A lot of VC companies besides Intel have focused on these same sectors, but without the same success. The difference?
Incredibly deep expertise helps a lot. But more than that, Intel provides mentorship and advice that spans technology, marketing and business development.
That's what differentiates Intel from other early-stage growth company investors.
And let's not forget that Intel has had 25 years to debug and sharpen its mentorship ecosystem. One example of this: It has developed a program that leverages Intel's vast global network. Every year, it brings 10 to 15 of its most promising startups together to meet with hundreds of executives from Global 2000 companies.
Not even the most powerful, plugged-in advisors and mentors can silver-platter such an opportunity.
The Intel Advantage
Intel's stable of startups seems to recognize its great and unique strengths... - JackBe says, "We get callbacks over 50% of the time from [Intel Capital] Technology Days. In some cases, we have gotten purchase orders. In others, we have gotten constructive criticism we have used to improve our product."
- Adaptivemobile says, "There's a degree of business understanding you get with Intel that you don't get from other VCs."
- Digitron says, "Access to Intel enabled us to enhance our manufacturing quality assurance and testing processes to conform to world-class standards."
- Sasken says, "Intel validated our business model and helped us bring the employees on board that we needed to grow."
Another Intel startup, Insyde, makes components. But manufacturers are so cautious about these that they favor established and known providers. Intel's investment gave the startup the credibility it needed to make sales.
The Final Piece of the Puzzle
The final piece of the puzzle: When its startups are ready, Intel sells them to the highest bidder.
So this is what you can take from Intel Capital's successful formula...
It's nice if your startup has a superb team. But it's not enough. You should also make sure it has a top-notch support network of advisors and mentors. And it should do everything possible to cultivate a network of deeply experienced pro-active investors.
It's the rare startup that can go it alone. Intel has demonstrated just how important such an ecosystem is to a startup's ultimate success.
[Editor's Note: In the next few weeks, I'll be looking at how other companies choose and cultivate their startup portfolios.]    
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