IBM Takes the Cash out of Venture Capital

Q&A: IBM Venture Capital Group executives make regular trips to emerging markets around the world, looking for startups with innovative products and technologies. But this is one VC organization that doesn't carry a checkbook in its briefcase.

/zimages/3/123060.jpgIBMs Venture Capital Group maintains contacts around the world looking for companies with new ideas and technologies that complement IBMs product line and service offerings. But IBM isnt in the business of investing cash in high-tech startups for research and development.

Instead IBM acts as the ultimate "rainmaker" that can bring startups together with customers, partners and professional venture capitalists who have cash to invest. When startups need cash, IBM can put them in touch with more than 100 of the worlds top venture capital firms.

Last fall, Clark and other venture capital group executives visited China to meet with entrepreneurs across Asia to get a look at the latest companies and their ideas.

To learn more about how IBM discovers promising new companies and technologies around the world, John Pallatto, eWEEK West Coast News Editor, interviewed Drew Clark, founder of IBMs Venture Capital Group.

How would you describe IBMs approach to venture investing?

IBM is investing in startups, but not directly in a cash or financial sense. Its really in the success of these companies. Frankly, what the venture capitalists find most appealing about their partnership with IBM is the fact that they themselves, the professional investors, have the ability to seek out and find the best team, the best technology, the best new business models to invest in.

But then [they can] be assured that IBM is right there with them to help take the next step, which is to make their companies successful by introducing them to IBMs wide-ranging partnership network, to our go-to market channels and to our industries.

What was the result of your recent visit to China?

We typically try to be in each of the emerging markets. By that I mean the traditional "BRIC" regions, Brazil, Russia, India and China, at least a couple of times a year.

This was our second or third trip to China this year. We had done something early in the spring in Hong Kong, called the online gaming workshop, where we invited a large number of VCs and, more importantly, online gaming startups, to come and discuss opportunities and mutual interest in IBM.

/zimages/3/28571.gifClick here to read about IBMs global alliance with Linux vendors Red Hat and Novell.

This event in November was actually much larger. I think we had more than 200 attendees representing pan-Asia, over 70 VC partners across Asia, as well as a significant number of their portfolio companies.

If you are not directly investing in these organizations, how is IBM getting benefits from them?

Thats probably a good opportunity for me to give you some specific examples. Lets take an example like YeePay—a Beijing services company [and] a startup only a few years old.

This is an example where it wasnt so much the technology that caught our attention, as the business model. Theyve got great technology. But the fact that they had this vision for micro- payments—for bridging between the creators of content and the banks and other credit agencies and the telecom providers—that was unique and something we hadnt seen before.

Next Page: Searching for venture opportunities.