Cisco claims that it invest in the best teams and technologies that improve how people work, live, play, and learn. The networking giant claims that it can accelerate the impact of startup innovations via direct access to Cisco customers, partners, business leaders, and Cisco IT.
Cisco Investments, the venture capital unit within Cisco, is looking to boost the amount of money it pours into technology startups worldwide.
Through the fund, Cisco currently invests between $200 million (£130 million) and $250 million (£162 million) annually in companies focusing on areas like networking, storage and the internet of things. But Janey Hoe, senior director at Cisco Investments, told Techworld today that the amount of money it spends on startups is likely to increase in coming years.
“Yes [it will grow]. I think we are in an all time high in terms of our deal activity,” said Hoe at Cisco Live in San Diego today. “We saw a sharp increase in 2014 and another increase in 2015. We don’t necessarily have a fund size as we invest out of our balance sheet. So we have cash and our CFO does not put a limit on what we can spend.”
Cisco Investments was formed in 1993 and today Cisco touts that its portfolio companies have a combined value of $2 billion (£1.3 billion).
The Cisco Investments team, which comprises of 40 people worldwide, typically invests between $3 million (£1.95 million) and $5 million (£3.25 million) in each startup, taking no more than 10 percent equity in the process.
“We’re investing in companies that are series A, B and C,” Hoe told Techworld. “Many of them already have products that are shipping with Cisco.”
But not every company that the investors backs returns a profit for Cisco. “One in 10 make it,” said Hoe. “You don’t need them all to hit it big,” she continued, adding that too many wins would imply the investment team isn’t taking enough risk.
While Cisco is a Silicon Valley company it’s also investing in firms beyond California.
“The US obviously tends to be a big part of our portfolio just because there’s a lot of companies right now in a lot of different sectors,” said Hoe. “We also have an EMEA presence and that’s pretty active and our second most active fund.”
Cisco’s EMEA investments team includes four people on the ground in London who have backed UK startups like Evrything, which connects consumer products to the web.
Some of Cisco Investments’ biggest wins in recent years include fabless semiconductor firm Ylocity, which was acquired by Qualcomm for a reported $300 million, and cloud phone system provider RingCentral, which IPO’d in 2013.
Incoming CEO Chuck Robbins told Techworld today that Cisco will create a “tighther connection” with its investment strategy under his leadership.
In order to get to where Cisco expects technology to be in three years from now, Robbins said he’ll be “very aggressive” with the investment portfolio division within the company.
Meanwhile, outgoing CEO John Chambers hinted that Cisco could be about to further support UK startups. “We’re coming to the UK in July and hopefully we’ll make some announcements at that time about commitments,” he said. “Remember when we invested in France we took minimum of $100 million in startup investments and you’re going to see that occur as countries digitalise around the world, if we’re able to form partnerships with governments.”
Chambers revealed that he’s “probably going to do a couple of startups” of his own, adding that he’ll sit on the board while also being an active investor.
Other large technology corporates like Microsoft and Intel have their own venture capital units. By way of comparison, Google Ventures is investing $400 million to $500 million each year in what it believes are high potential companies, including the likes of Uber.
But getting venture capital funds to part with their money can be difficult and cumbersome, with many partners and investors receiving hundreds, if not thousands, of startup pitches every year.
“I think the worst pitches focus too much on technology and they don’t tell you what customer problem they solve,” said Hoe. “I want to hear that in the first line. That gives me a quick sense of whether I think they’re relevant or not.”