Dell Technologies, Now Out Of Stealth Mode, Eyes AI & IoT As Fund Ramps Up
For an active VC arm, #DellTechnologies and its nine-figure fund has been awfully quiet. After coming out of stealth mode in May, the fund has seen its fastest pace of investment this year since it was formed five years ago. The word “stealth” may be confusing if we’re talking about an investment arm that launched several years ago. So let me explain. Previously, the fund operated under the radar as two separate entities: #DellVentures and #EMCVentures. In 2016, the two merged and #DellTechnologiesCapital was born. This year, it went public with its investing. Here is what the firm has been up to. Dell Goes Shopping In the first half of its fiscal year (from February to September), the venture arm of Round Rock, Texas-based @DellTechnologies closed 27 investments. Scott Darling, president of Palo Alto-based Dell Technologies Capital, told Crunchbase News the fund has made about 80 investments over the last five to six years. Those investments have seen 33 exits, including #VMware ’s April acquisition of cloud monitoring company Wavefront and #WesternDigital ’s August buy of cloud services startup #Upthere. “A lot of people ask if the merger between #Dell & #EMC affected our deal flow,” he said. “It has, by picking up the pace. We’re actually running at a record pace.” To Darling, the beauty of running a corporate venture arm is that he gets to combine the “best of a private venture firm with the best of a corporate investor.” Partners were hired out of firms like Kleiner Perkins Caufield & Byers and General Catalyst. “If you couple that experience with the go-to-market capability a company of Dell’s size can bring to a startup, that’s pretty powerful,” Darling said. “Since we don’t have to worry about LPs likes and dislikes, we have a lot of flexibility.” Related Salesforce Ventures Focuses On AI Not surprisingly, Dell Technologies Capital is focused on investing areas that are strategically aligned with its parent company’s business such as storage, networking, software infrastructure, and security. It has also made a dozen or so investments in the artificial intelligence space and finalized deals with IoT startups. And those deals are often made in the early stage of a startup. According to the firm, ninety percent of Dell Technologies’ investments are in series A or B rounds and range from $1 million to $10 million (although they have invested both more and less depending on the deal). Investments total about $100 million a year. Darling estimates the fund looks at 500 to 700 companies a year; however, it only ends up investing in about 30 to 40. It tends to invest in companies that are led by entrepreneurs it’s backed before or those that are referred by said entrepreneurs. “When companies are vetted by people who are knowledgeable, the hit rate is a lot higher,” Darling said. Venture Perspective Austin-area venture capitalists largely welcome the ramping up of Dell Technologies Capital. Mike Smerklo, co-founder & managing director at Next Coast Ventures, an Austin-based investment firm, believes Dell is in a unique position. Related CVCs Teeing Up The Most Inside Acquisitions “We think Austin needs more capital – not less – to support the city’s ever-expanding technology and entrepreneurial ecosystem,” he told Crunchbase News. “So we think this is a great addition to the Austin venture capital scene and see it as complimentary to what firms like Next Coast and others are trying to do.” Rajiv Bala, principal of S3 Ventures, views Dell Technologies Capital as more of a partner than competition. “The Dell and EMC venture groups have been very active over the past several years,” he said. “We are excited to see them formalize and announce the activity. Access to capital is always a good thing for entrepreneurs and for the startup community.” Morgan Flager, general partner at Austin-based Silverton Partners, also doesn’t view Dell’s venture arm as competition. “DTC invests across a broader set of stages and geographies, while targeting categories where they can best leverage their strategic insight and domain experience,” he said. “The skills and access that the DTC brings is quite unique and complimentary to what we offer and I expect there is a much greater chance we will partner on local investment opportunities than compete.” In particular, Flager believes Dell can not only provide entrepreneurs with additional access to capital, it can also help provide “insightful guidance and market access.” BlueData Kumar Sreekanti, co-founder and CEO of Santa Clara-based BlueData Software, is an entrepreneur that has been a recipient of the Dell Technologies venture arm. In 2015, his company raised $20 million in a series C round that included participation from Intel and Dell Technologies Capital. BlueData describes itself as the VMware for big data. The startup provides software to large enterprises to allow them to build big data and run machine learning and AI applications. Sreekanti said, at the time, BlueData had the choice of accepting money from many other VC funds as well corporate strategic investors. But it went with Dell Technologies Capital because of the strategic guidance that could be gained. “Scott [Darling] and his team have been very insightful. I meet with them very often and discuss the business and questions I have on my mind,” he said. “They are more than just investors.” If Dell keeps its investment pace high, it could make a big mark in Texas. After all, the state’s venture scene could stand to get a boost. But what remains to be seen is how long Dell will remain an active investor, especially if the market turns. For all parties involved, let’s hope that the good times continue to roll.