Jim Lussier, managing director of Dell Ventures, photo courtesy of Dell
, the investment arm of Dell, has announced a new $300 million Strategic Innovation Venture Fund.
The goal of the venture fund is to find the next Michael Dell, said Jim Lussier, managing director of Dell Ventures.
The fund will invest in early-to-growth stage companies, particularly targeting storage, cloud computing, big data, next generation data center, security and mobility.
Dell has invested in one seed stage company. It will invest in Series A, B, C and even D rounds.
The latest fund builds on the $60 million Dell Fluid Data Storage Fund announced last year.
Silicon Hills News sat down last Friday at Dell World with Lussier to ask questions about the new venture fund.
“We’ve already made investments so today is just to announce the expansion of our focus and the capital to do it,” Lussier said.
Q. Where does the initial $60 million storage fund stand, has all the money been invested?
A. No. The plan with the initial $60 million storage fund was to invest over 18 months to 36 months and we’re well on our way to reaching the target with the number of investments. And we always reserve a significant portion of the fund for follow on investments. The startups are really early stage. It may be two, four or six years before they achieve liquidity and we want to be there for these startups all the way through. So we have some capital remaining in that allocation to support those startups. And then we have additional fresh capital for all these new areas.
Q. Have 14 companies received funding so far?
A. Yes, and there’s even more than that. We’ve closed more and we’re announcing even more.
Q. How is the $300 million fund carved up?
A. We have some guidelines. But we don’t have hard specific allocations for each area. We want to have some flexibility as opportunities unfold to invest in all these areas. There may be a new area that unfolds that we may add to this. I think the main point is we’ve got $300 million to invest in innovation that’s strategic to Dell that will help our customers and help entrepreneurs to be more successful.
Q. Does the fund invest globally?
A. Primarily in the U.S. We’re open to investments anywhere in the world. We are primarily focused in the U.S. with investment teams in Austin and Silicon Valley. We also have some venture funds that we’ve invested in emerging markets like China and Russia and other areas that gives us eyes and ears into those markets.
Q. What’s the initial range for investment deals?
A. Our average investment is $3 million to $5 million. But we’ve got a lot of flexibility in our model and we can range from anywhere from $2 million or less to $15 million or more. We’ve done less. We’ve done more. So we’re investing in early to growth stage companies. We invest in everything from pre-revenue to companies that have a $5 million, $10 million or more run rate.
Q. How does a startup approach Dell Ventures? Is there an online application?
A. It’s almost like approaching any other VC. The best way to approach us is through a warm introduction. That can be from someone in a business unit at Dell. It can be through someone in the VC community. It can be through your own personal network. We do have a website and there is a contact there. Business plans can be submitted that way. But the best way is through a personal, warm introduction, as opposed to an email over the transit.
Q. What happens once Dell invests in a company?
A. Generally, our model is to co-invest with other financial and strategic investors. We can lead rounds. We prefer to join an existing syndicate. We tend to go on the board as an observer. We become your advocate inside and outside Dell as that board observer. We involve the business units that are appropriate so that information that is helpful to the startup is communicated within the business unit. Proprietary information is held confidential.
Q. Is the Dell Venture Fund part of Dell’s acquisition strategy?
A. It’s a complement to our M&A strategy. We will invest in companies to learn, to support a commercial partnership that we’re doing. Down the road we may acquire that company but it’s not a prerequisite.
Q. Does Dell have a formal startup program for entrepreneurs?
A. The programs we have for entrepreneurs are the Dell Founders Club, which provides networking opportunities and access. We’ve got the Dell Innovators Credit Fund where Dell Venture backed companies can secure financing for products and services on good terms.
Q. Where is the pipeline of investment deals coming from? Are you getting a lot from Austin?
A. I think it’s pretty evenly represented in where the venture investment is. Some of the latest statistics I’ve seen say 40 percent of all venture investment is done in Northern California and another 10 percent in Southern California. So probably half the deals we’re seeing are in California. The East Coast probably represents another 25 percent between New York and Boston. Austin is in there. It’s a healthy and growing percentage. Healthy and growing single digit percentage. We do see a number of interesting companies coming from Austin. It seems like it’s a really vibrant entrepreneurial area for us.
Q. Has Dell invested in any Austin or Central Texas startups? Can you name them? Do you disclose them?
A. We’ve got a number of deals we’re looking at from Austin. We will disclose the deals on a case by case basis. We’ve invested in two already and there will be another on Monday. There will be selective disclosure when it’s in a company’s best interest to disclose. Sometimes they want to disclose it or sometimes they don’t. We, for our own reasons, might not want to show our hand to the whole world.
Q. Is Dell looking at consumer facing investments?
A. Yes, we are, opportunistically. We announced those six focus areas but it’s in our interest to remain open and flexible and opportunistic and we do see deal flow in and around consumer facing technologies. We’re focused elsewhere but we do see deal flow in that area.
Q. Are you seeing quality deals or are you seeing deals that reflect the 2000 era of the Dot Com bubble?
A. I’d like to think we would invest in only quality deals. I’ve been involved in venture investing since 2000 and there’s always a mix of quality teams with disruptive ideas and great business plans combined with some ideas that are less compelling. And, as you know, we’ll look at 100 companies before we’ll fund one and so we’re very selective. I don’t see a huge difference. I think it’s always been that way.
Q. What advice would you give to entrepreneurs?
A. Know your market. Understand the customer needs. Make sure you’re solving a big problem, a real problem. Work hard to get the right people around your idea.
Q. What mistakes do entrepreneurs make when they are pitching to you?
A. They need to build for the long-term. You want to build a company to eventually IPO. Not every company will get there. But if you build with that mind, you may get some opportunities along the way and you may get an offer that you can’t pass up. If you build it to sell it, you may sub-optimize opportunities. I think some entrepreneurs are overly obsessed with valuations. It’s important to create a valuation that is good for the company and the employees you are yet to hire and good for the investors and creates an opportunity to explore an up round in the future. I think another thing is to be capital efficient. Make as much progress as you can before you talk to us. Take as much risk out of the idea as possible on your own resources and through family and friends. That way you’ll maximize your chances of getting funding in the first place and on more attractive terms.
Q. What kind of stake does Dell take in a company it invests in?
A. We want to own enough of the company for it to be important to us and for it to be important to the company. It will vary depending on the situation.
Q. How is going private going to impact Dell Ventures?
A. Whether public or private, my marching orders have been to do more, invest more, go faster and this $300 million fund is evidence of our intent to actually accelerate our investment pace and to make more bets and bolder bets going forward.
Q. Anything else that you would like to add or make a point of that I have not asked you about?
A. It’s an exciting time to be at Dell. This is a team effort between the business units, our corporate office, the CTO, the Dell Ventures team as well as the VCs and all the entrepreneurs we’ve worked with. We’re really excited about what we’ve been able to build so far and we’re very optimistic about the future.
