VC Looking For New Clients - True Story

Yesterday I spoke with Nagraj Kashyap - vice president and head of Qualcomm Ventures. In case you've sort of missed the whole wireless communications boom, Qualcomm is an S&P 100 company with a $77 billion market cap and $11 billion in annual revenues.

Like a small number of big companies - most notably Intel - Qualcomm has a venture arm that operates very much like a traditional venture capital firm, with five notable differences:

  1. It typically looks for startups that are "strategic" to Qualcomm's wireless and mobile business focus, although its definition of those segments are relatively broad.
  2. As a strategic arm of a large, profitable company, it can afford to invest for the long-haul. So even in the current market climate of limited IPOs and acquisitions, it's less risk averse than most VCs.
  3. Within its area of expertise, its due diligence and technical resources are second to none, so when it invests, that's quite a credibility stamp.
  4. It's actually looking for startups to invest in. In fact, it's currently promoting "QPrize" an international business plan competition that will provide over $500,000 in early stage capital for enterprising technology companies.
  5. It's based in San Diego, not Silicon Valley. Why is that relevant? It's a great place to hang out.
As for the interview with Mr. Kashyap , I focused on two main lines of questioning:

Opportunities and advice for entrepreneurs in this difficult market climate

First, we look for a strategic fit for Qualcomm - wireless and mobile, broadly defined. Then we look for a management team with a successful track record in previous startups or operating roles. Finally, potential portfolio companies should have a good monetization strategy.

In this market climate in particular, we tend to look for teams that have demonstrated a track record of conservative cash management, who prove they can do more with less. If you think you have a good idea, conserve spending as much as possible and come to VCs once the idea is more fully developed.

Also, our investments are becoming more and more geographically distributed. In fact, QPrize is an international competition running concurrently in China, Europe, India and North America. India and China, in particular, present great opportunities because their markets are so large.

The U.S. does not have a lock on innovation.

The future of venture capital In light of the current industry meltdown
There will be changes, but we see that as a good thing. There has certainly been an exit of capital from the asset class and some limited partners will not come back. Some firms can't raise new funds, which leaves them essentially managing their current portfolio. That has indeed led to a dearth of capital, which will in turn lead to a shakeout of weaker startups.

Overall, I think that's positive. Before we had too much money chasing too few deals.

[Thanks to Michael Selvidge, Qualcomm Ventures' "PR Dude," for setting up the interview and for a great headline.]