Investing in Global Innovation

Tammi Smorynski Director, Intel Capital

May, 2011

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Agenda

Intel Capital Overview Traditional Venture Funding Current Venture Environment Pitfalls to Get to Commercialization

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FINANCIAL

Intel Capital Mission

Enhance Intel’s Strategic Objectives By Making and Managing Financially Attractive Investments

STRATEGIC

A Stage Agnostic and Long-Term Investor

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Intel Capital Invests In a World of Possibilities

Enterprise and Cloud

Mobility

Software and Services

Embedded & Communications

Tablets Smart Phones

Notebooks

Meego™ & AppUp Center™ Cloud Computing

Open Source Security / Big Data Visual Computing Mobile Internet

Servers, Networking & Storage Manageability & Virtualization Security & Data Management Data Centers & Cloud Services

Digital Signage Connected Car & IVI

Home Energy Management Communications Infrastructure

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Intel Capital Invests In a World of Possibilities

Digital Home

Consumer Internet

Manufacturing Memory

Cleantech Greentech

Smart TV Home Networking Silicon

Platform Software Connected Devices & Services

e-Commerce Social Media

Consumer Services Mobile Web

Tools & Infrastructure

Grid Infrastructure Home Energy Management

Smart Commercial Buildings Microgrids & Communities

Semiconductor Process Materials & Equipment

EDA Tools & IP Non-Volatile Memory

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Intel Capital Investments

2010

Historical

44% of Dollars Outside N. America

40 International Investments

12 IPOs

17 Acquisitions

36% of Dollars Outside N. America

48 Countries

189 IPOs

258 Acquisitions

119 Deals

US$327M

1,100+ Companies

US$9.8+Billion

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Intel Offices

Intel Capital Invested

26 Intel Capital Offices Investments in 48 Countries

Intel Capital Global Presence Invested $9.8+ Billion in 48 Countries

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2010 Intel Capital Exits Working to Help Companies Exit Successfully

ATIVI - Telecomnet, Inc.

USA

China

USA USA USA

China

USA USA Germany S. Korea

USA China India USA

China USA USA USA

India

USA Canada USA S. Korea

USA Japan Brazil

USA

USA

India

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Intel Capital Technology Days ● Customized engagements ● 10-20 portfolio companies per ITD ● 60 ITDs per year ● 90+% follow-up rate ● Win-win-win for portfolio companies, customers & Intel

Delivering Win-Win Introductions 325+ Technology Days Since 2005

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Intel Capital CEO Summit 2010

Paul Otellini CEO, Intel Corporation

Arvind Sodhani President, Intel Capital

Intel EVP

Brian J. Dunn CEO, Best Buy

Sir John Major Former Prime Minister, UK

Duncan L. Niederauer CEO, NYSE Euronext

Les Moonves CEO, CBS Corporation

Informative Speakers

CEO Elevator Pitches, Networking, Networking… Networking

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Intel Capital’s Unique Advantages

● Leading technology investment organization

● Invests at all stages in private and public companies

● Leads investment rounds, takes larger stakes, actively participates on boards

● Speed and agility to make quick decisions

● Global brand recognition

● Committed to portfolio company success

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Intel Capital Overview Traditional Venture Funding Current Venture Environment Pitfalls to Get to Commercialization

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Venture Capital Investing

LIMITED PARTNERS

Pension Funds

Foundations

Wealthy individuals

VENTURE FUNDS

Kleiner Perkins

Sequoia

….

START UPS

ALLOCATE: ~5%

FUND = Committed Cash

10 YEAR LIFE

CALL

funds

INVEST,

with new

Lead

EXITS:

IPO (BEST)

M&A (GOOD)

Shut down

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Limited Partners

$100M Intl Equity

$100M US Equity

$100M Hedge Funds

$100M Commodities

$100M Cash

$100M Money Market

$100M Intl Bonds

$100M Bonds

$100M Real Estate

$100M PE & VC

Pre 2009

$1 BILLION

10%

$30M Intl Equity

$50M US Equity

$10M Hedge Funds

$50M Commodities

$100M Cash

$90M Money Market

$30M Intl Bonds

$70M Bonds

$10M Real Estate

$70M PE/VC

2009

$510M

13.7%

Monthly $5M Contributions

Monthly $7M Payout

to retirees

Monthly $1M Contribution

s

Monthly $4M Payout

to retirees

Liquidation

Issues

r

r

r

r

r

r

r

r

r

r

r

r

r

r

r

r = return

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Limited Partners

● Told VCs to not ask for money (liquidity issues)

● Then reduced EXISTING commitments (allocation issues)

– Reduce amount you will send in future

– Reduce amount you already sent = require VC firms to sell shares in secondary market

● Not making NEW commitments (both liquidity & allocation)

NET-NET: Reduction in $ available for Venture Investing

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Venture Firms

● VCs unable to time when LPs will send funds in 2009, so focused on existing portfolio. Now looking for new deals.

● Since LPs reducing commitment levels…VC firms shrunk or wound down.

● For now, VCs have moved away from early stage, high capex deals in certain sectors (e.g. hardware)

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Venture Firms

● Impact from start ups:

– No liquidity events… so no cash coming back in to VC to help them w/ LPs or other start ups

– Revenues pushed out requiring once profitable and near breakeven companies to now need cash

– No IPO or debt markets available for funding, requiring higher VC cash requirements then planned

● Impact from other VCs:

– No new investors to price/invest large $ in companies

– Once strong VC syndicates unable to support companies

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Number of Venture-capital firms and Capital managed 2000-2008

Source: Wall Street Journal June 5, 2009 from National Venture Capital Association Note: Active venture-capital firms that have raised funds in the last eight years

# of firms declined

in ’09; not over yet

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Investor Pool: Information Technology Number of IT-focused VC Firms 1990-2008 YTD

171 149 145 164 203 241 306 377 384

616 778 771 735

647 526 484 482 441 367 94 97 116 101 104

119 139

184 214

303

560 479

376

315

280 295 271 235

163

117 107 105 102 96 127

156

195 246

424

755

496

323

312

332 314 283 263

152

0

500

1000

1500

2000

2500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

=> 4 deals

2-3 deals

1 deal

Source: DowJones Venture Capital Industry Report, VentureSource Note: 2008 data through 10/2/08

# of firms declined

in ’09; not over yet

682

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Start Ups

● Turbulent economic environment slowing down revenue ramp, time to breakeven

● Delayed EXITS (IPOs, M&A)… requires more funding to get company to breakeven or liquidity event

● Lots of Insider rounds… slow painful process

● Cutting work force, pay cuts… shutting down

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Life Cycle of a Start UP

● Idea

● Business Plan/Investor Deck

● Angel Funding

● Series A – Series ?

● Liquidity Event = Investors able to get cash back

– IPO or M&A or shut down

● VCs have < 10 year time horizon due to Fund Rules

– So start ups get < 10 years to get to liquidity event

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Intel Capital Overview Traditional Venture Funding Current Venture Environment Pitfalls to Get to Commercialization

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Impact of Market Decline on Venture Investing

● Oct 2008 : Sequoia presentation

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2009 vs. Tech Bubble

● 2009 economic situation was worse… as impacts all sectors across everyone around the globe

● Sequoia’s 2008 presentation was a good wake up call to everyone… start ups moved faster than during tech bubble to cut costs

● Prices came down on VC deals given less VC competition

● Revenue opptys for start ups increased as competition went out of business

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2011 – Dichotomy

● Start ups

– Hot sectors: mostly in software… funding, high valuations

– Consumer internet or ‘fads’ e.g. gesture…

– Competitive, biz models/revenues still be to proven out

– Out-of-favor sectors: mostly in hardware… difficult funding environment, low valuations

– Must be frugal, look for alternative funding (SBIR, DARPA, etc.), often required to show working device for Series A (unheard of back in the ‘90s), expect operational experience on mgmt team

– Less competitive, able to make revenue progress

● VCs

– Thriving: good brands, able to raise $, manage portfolios

– Striving: not clear if can raise next fund; portfolios flaming out

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Intel Capital Overview Traditional Venture Funding Current Venture Environment Pitfalls to Get to Commercialization

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Novel technology is not itself sufficient to get something to commercialization and a successful

liquidity event.

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Research vs. Commercialization Research Commercialization

Team

Constraints

Cost

Volume

High Volume Manufacturing

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Research vs. Commercialization Research Commercialization

Durability, Power, Size

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Research vs. Commercialization Research Commercialization

Certifications, warranties

Competition

Channel

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In Conclusion

● Understand funding environment

● Novel useful innovation will get funded but may take time… prepare accordingly

Investing in Global Innovation