Intel is not just inside your computer. The microprocessing group is also inside emerging technology companies.
More precisely, it is providing funding for fledgling companies that use its products.
One of Intel's most successful investments, for instance, is its backing of Research In Motion (RIM) - the company behind the development of the Blackberry cellular phone - in the late 1990s.
RIM is now a screaming success. In 2005 the deal started to pay off more directly for Intel when it reached an agreement with RIM to have it use Intel's processors in its next generation of handsets.
Intel is trying to emulate this success through its private equity investment arm, Intel Capital, which has funded more than 1 000 businesses in more than 45 countries to the tune of US$7,5bn over the past 18 years.
It may not be a household name when it comes to private equity in SA, but its numbers show that Intel Capital is already a substantial venture capital firm. In 2007, it invested about $639m in 166 deals - and 37% of that amount was invested outside the US. More impressively, 168 of Intel Capital's investments have been listed as public companies.
Its notable investments include Indian online community company Rediff, the US medical news website WebMD, Japanese mobile content provider Bellrock Media and Chinese circuit design firm Actions Semiconductor.
It all sounds rather fancy, but what does this mean for SA?
Until now, SA has not been on Intel Capital's radar. But this changed at the beginning of the year when it set up a local venture capital division under the leadership of Sam Mensah.
Mensah has been at Intel Corp for the past six years. Before that, he worked in London at Deutsche Bank, and for technology consulting firm Gresham Financial Systems.
Mensah hopes Intel Capital's presence in SA will alter the investment community's apprehensive attitude to putting money into up-and-coming technology companies.
This caution is understandable, of course. One of the biggest problems for finance fundis is that often they don't know a lot about technology and are hesitant to invest in something they do not fully comprehend.
This creates a self-fulfilling prophecy because by not investing in technology firms, there are few success stories to spur further investment.
Mensah says the success of Internet billionaire Mark Shuttleworth illustrates the potential rewards for venture capital investors. Shuttleworth famously started Thawte Consulting from his parents' garage in Durbanville, before selling it in 2000 to Microsoft for $575m.
Thawte sold digital certificates to an international customer base, effectively securing and authenticating Internet transactions.
Mensah says that if SA took technology investing seriously, there'd be more companies emulating Thawte's success. "There has not been a critical mass of people making money and then selling their firms."
This can change if local investors tap into Intel Capital's know-how. The plan is to have Intel Capital acting not only as an investor but also becoming an adviser to other prospective investors on funding technology companies.
He says Intel Capital has thousands of engineers and scientists around the world it can call to assess if a project is "bankable" or not. "By its participation, Intel Capital will bring a certain degree of comfort to local investment houses," Mensah says.
But there is another reason local investment houses and local inventors should be pleased that Intel Capital is setting up shop in SA. Besides providing technical expertise and funding, Intel Capital also comes with relationships with global suppliers.
A fledgling company might have a good idea, but without suppliers to provide components at competitive prices, even its best idea may fail. Companies in Intel Capital's portfolio get components at a discounted rate.
Typically, Intel Capital will hold from 15%-25% in a prospective investment, take a seat on the board and insist on a business unit agreement.
Since setting up in January, Mensah says he has already seen some proposals. But he wants to see a lot more. "The deal flow is healthy, but could be better."
So why is Intel Capital setting up now, rather than earlier? "Quite frankly, we don't want to miss the boat," he says, referring to the "abundance" of "great business opportunities" in Africa.
He points to the success of local mobile telecom group MTN as an indication of what can be achieved. MTN's success took the market by surprise. Partly, this is because at the market's genesis in 1994, it was assumed that cellphones would be "high-end devices", with a potential subscriber base of only 500 000. Now, MTN alone has 16m subscribers in SA - so it's easy to see why Intel is expecting big things from SA.
Mensah says Intel Capital will provide "innovative homegrown technology companies not just access to our capital but also our technological expertise and global network".
He has not been sitting on his hands since taking the job. In the past three months, he has met other private equity groups, venture capital firms, the Industrial Development Corp and the National Empowerment Fund to discuss cofunding technology projects.
Ashish Patel, Intel Capital's MD for Europe, Middle East and Africa, says: "We look forward to investing and working with local businesses to help them grow."
Surprisingly, Mensah does not see Intel as a venture capital company. Unlike traditional private equity, Intel Capital does not have any timeframes in which it plans to find target companies and invest - there are either good investments or none, says Mensah.
He also points out that though the company has helped develop more than 1 000 companies, it has only bought out a handful of them. SA technology companies, largely ignored by traditional private equity investors until now, must be licking their lips.
