Best of 2019: Avram Miller and Lessons for Corporate VCs

[June 18, 2019]

Corporate venture capital (CVC) firms broke records last year. Funding increased 47% to $52.95 billion and 264 new corporate venture groups invested for the first time, a 35% increase over 2017. There were 773 active CVCs worldwide in 2018, participating in 23% of all VC-backed deals, with the average CVC deal size reaching an all-time high of $26.3 million, according to CB Insights.

But for venture capitalist Fred Wilson, “corporate investing is dumb… Don’t waste your money being a minority investor in something you don’t control. You’re a corporation! You want the asset? Buy it.”

Is Wilson only complaining about the competition or is he right to argue that the main motivation for this tsunami of venture corporate dollars is to make executives “look smart” in front of their bosses? Are we witnessing the peak of yet another tech bubble with all corporations suffering from Silicon Valley Envy (SVE as opposed to VC’s FOMO) or are they just looking for somewhere to park—and possibly increase—their growing mountains of cash? Are we going through a fear-of-disruption period similar to the late 1990s or does “digital transformation” actually capture a fundamental shift in competitive strategy, in how to make a corporation thrive today?

To paraphrase Joseph Conrad, for a business strategy to be successful, “it must contain the care of the past and of the future in every passing moment of the present.” History is crucial to understanding the present and divining the future. So to better understand the current corporate tech-investing rush and how to make it more focused as an agent of change, I talked to Avram Miller. Almost three decades ago, Miller co-founded Intel Capital, one of the most prominent CVCs then and now.

Avram Miller

Avram Miller

Since 1991, Intel Capital has invested $12.4 billion in 1,544 companies in 57 countries. During that time, 670 portfolio companies have gone public or participated in a merger. Last year, it invested $391 million in 89 companies with 38 new investments and was the third most active CVC worldwide, according to CB Insights (it was #2 in 2017 and #1 in 2016 and 2015).  According to an Intel spokesperson, Intel Capital has been making in recent years fewer new investments each year so it can take more meaningful stakes and play a more relevant role in helping startups grow and succeed.

For his first three years with Intel, Miller worked on a joint venture with Siemens to develop a fault-tolerant computer, a project that eventually became BiiN, a jointly owned company. Miller’s next task was to help Intel “expand its footprint” and in the process expand its horizons by acquiring knowledge of adjacent market spaces.

To this aim, Miller started to buy small companies on Intel’s behalf, “mostly for their people” and mostly people with networking and communications expertise, as that market was “silicon-intensive.” Miller presented this idea to the Intel board and it was approved but… “it didn’t work because the culture of the company was so strong. The antibodies came out and rejected the foreign entity.” The acquired talent didn’t stay.

The solution was to take minority positions in startups instead of acquiring them. When Les Vadász came back from sabbatical in 1991, this activity was formalized under him as Corporate Business Development (CBD) which later was re-named Intel Capital. Miller focused his investment activities on the consumer market for computers—because that was what interested him (when he joined Intel, he later told Robert X. Cringely, “secretly what I wanted to do was to get into the consumer electronics business”) and, if I may speculate, because “Andy said there is no consumer market for computers.”

Grove told Miller he was wasting his time, but “the good thing about Andy was he wouldn’t stop me.” And no one else at the company stopped him because they didn’t care, says Miller, “benign neglect, you know, I could go out there and do that.” And he did it at the right moment, “because we started having the Internet and there was all this convergence of things,” says Miller.

“Convergence” was THE buzzword of the early 1990s, heralding the coming fusion of computers, communications and content (media). Miller was at the center of all things converging, both offline and, increasingly, with the emergence of the Web, online.  At first, “convergence” was equated with “interactive TV,” beefing up television sets and channels to provide a wide range of content and data services to the home. Intel was less interested than other players in TVs and more interested in PCs as the target for all this new consumer interactivity. Grasping the large opportunity for selling more “Intel Inside” PCs, Miller was instrumental in the development of residential broadband, pushing Intel and others into the development of cable modems as facilitators of new media streams into the home (removing “the bottleneck over the ‘last mile’ connection to the end-user” as Hybrid Networks, one of Miller’s venture investments, described itself in its 1997 IPO).

“I couldn’t believe the amount of money that was being spent to do interactive television,” says Miller. “It never happened. It still hasn’t happened. People don’t want to interact with their TV. Unless you are a gamer.” But the interactive home PC did happen. Instead of making the existing TV distribution network work like the Internet, the winning solution—and the triumph of the PC over the TV—was the adding to the Internet of a truly interactive, linking-everything piece of software, the World Wide Web.

Being at the center of all things converging—and pushing hard for the PC as the end-user solution—meant that Miller and Intel Capital benefited greatly from the resulting dot-com bubble. Miller was the only outside person quoted in the April 1994 press release announcing the establishment of Mosaic Communications, later known as Netscape. According to Miller, he and his colleagues thought that Netscape’s valuation of $18 million was too high and passed on the opportunity (“we never invested in anything Kleiner Perkins was in,” says Miller). A year later, at its very successful August 1995 IPO which launched the universal rush to dot-com glory, Netscape had a market value of $2.9 billion.

But Intel Capital backed other Internet-related startups with valuations that were more in line with its rational exuberance and disciplined investment criteria and became, in certain years, the second-best business unit in the company in terms of profitability, according to Miller.

Continuing their focus on the “intersection of the Internet and broadband,” they invested in information security (e.g., Verisign), in companies “transporting media” (e.g.,, and companies creating new online content and communities (e.g., Cnet, Geocities, CMGI). Miller was a proactive investor, styled himself as the “activist strategist,” and wasn’t interested in companies coming to him. “I was interested in theory,” says Miller, “in figuring out where the next wave was,” and looking for the companies representing it.

By the time he left Intel in 1999, Miller and his team were doing 2 to 3 deals per week and presiding over a multi-billion dollar portfolio. Investment discipline was important and Miller was divesting 5% to 10% of the portfolio every quarter. So was establishing processes ensuring due diligence and the review and approval of Intel’s finance and legal functions.

One of the advantages of Intel Capital over a traditional VC firm was that “I had Intel behind me,” says Miller. Other advantages included Intel’s wide network of strategic partners in all segments of the industry which meant they knew a lot about what other companies were doing, knowledge that could help the startups they were backing. In addition, they could support them with Intel’s unique capabilities and technologies and broad understanding of technological roadmaps and trajectories, thus increasing the probability of success of these startups. “Once people realized this, they wanted us to be investors,” says Miller. But what did Intel get out of these investments?

Intel Capital had three major objectives according to Miller: Financial return, growing the market, and strategic insight. The positive financial returns were an important measurement of success for the venture investments but were not the most important objective. “We made a lot of money but this is not why we were in business. Our mission was strategy first, money second,” says Miller.

The strategy was to grow the market. Intel was in a unique position in that regard. “We own 85% of the market” for PC chips was Miller’s thinking, “so if we grow the market, we get 85% of that.” At the time, Andy Grove called this growing the market strategy “the PC is it,” telling Fortune in 1995 that “We can make it so superb as an entertainment machine, and so vital as a communications medium for both the home and the workplace, that it will battle with TV for people’s disposable time.” Says Miller: “I feel very comfortable saying that we grew the market substantially by the things that we did.”

Miller’s contribution to the “PC is it” growing-the-market strategy went beyond venture investments. To a large extent he became what today we call a market and company “evangelist,” the go-to-guy for the media and analysts seeking colorful commentary on technology. In 1996, for example, Miller spoke at the Bear Stearns Technology Conference about the Internet as the focus of “a new medium he dubbed The Connected PC,” driving “profound changes in the nature of communications, resulting in ‘social computing’ and direct contact with one’s customers,” and, of course, increased sales of PCs. “I was one of the few people [at Intel] that had a personality and I’d get sent out,” he observes.

The third key objective, “strategic insight,” could have simply meant gaining knowledge of new trends, technologies and business models by investing in entrepreneurs and their innovations. But Miller defines strategic insight in broader terms to include actual change to Intel’s business strategy. And he states categorically: “From a strategy point of view, I don’t think we did much for the company. We’re investing all over the Internet, consumer Internet, from top to bottom. We’re in all these deals, we understand exactly what’s going on. What did we do about it? Nothing.”

Miller uses information security as an example. Based on their investments and understanding of the evolving market, Miller realized in the mid-1990s that “we have to find a way to let people own their data, a way to encapsulate the data in such a way that they have the key.” But this insight did not turn into a new strategy, a new business, a new addressable market for Intel. Why?

Considering the desire for change expressed to Miller when he was hired and what became to be known inside Intel as Grove’s Law—”only the paranoid survives”—why didn’t Intel capitalize on its successful investments in Internet-related and other startups to transform itself again (as it did when it moved in the 1980s from memory chips to PC microprocessors)?

The microprocessor was like a vein of gold. And when you dig up all the gold, Miller used to tell Andy Grove, all you are left with is a big hole. Intel needed to get out of there but “it was just impossible. Andy got stuck, he couldn’t move.”

Why couldn’t Andy Grove move—a very successful business leader who has already managed before a courageous and difficult move and has spent the 1990s being paranoid, promoting the theory of “disruption”? One answer was given years earlier by another very successful business leader which Miller had the privilege of working with—Ken Olsen, founder and CEO of Digital Equipment Corporation (DEC).

“Probably the biggest danger, the biggest human weakness, comes from a few years of success. It blinds us. It blinds anyone. Pride—probably the biggest human weakness,” says Olsen in a film intended to celebrate DEC’s 25th anniversary which ended up focusing entirely on Miller and his team developing Digital’s first PC in 1981-1982. The film, never shown internally or publicly as originally planned, “exemplified the confusion that rocked Digital in the early 1980s,” say Glenn Rifkin and George Harar in The Ultimate Entrepreneur, published in 1988, at the peak of DEC’s success and just before its quick descent into tech oblivion.

Olsen got it right about pride. In 1983, Wall Street demanded his ouster from the company he founded. And he proved them wrong, leading Digital through its best years. When Fortune calls you (in 1986) “arguably the most successful entrepreneur in the history of American business,” it does something to your pride, to how much you tolerate arguments, to your willingness to get unstuck.

Great business leaders get stuck even when they are very aware of the dangers of success and of human weaknesses. Jeff Bezos’ insistence that it always “day 1” at Amazon, that it will always act as a startup, does not guarantee that Bezos and his successful creation will not get stuck in the future. And no matter what they tell you in business schools, I don’t believe there are any rules or prescriptions or 12-steps or whatever else that could turn this awareness into guaranteed longevity, agility, and triumph over all competition. Just like any other human activity, business and succeeding in business is a multi-faceted endeavor subject to too many variables for us to predict what will or will not work in a given situation. The same actions that work for one company may not work for another.

Still, my conversation with Miller brings up a few observations about where and when great business leaders can get stuck and what does this mean for setting objectives for corporate VCs.

Leading with and adhering to the made-up dictates of Moore’s Law, Intel tied itself inextricably to the prevailing dogma of the computer industry’s: Faster and faster processors. The speed of calculation has been the measure of everything since the early days of computers in the late 1940s.  Miller says he used to tell Grove that Intel’s competition was not AMD, it was a larger monitor—”If I only have so much money to spend, do I get a faster processor or a bigger monitor?”

Intel also carried the burden typical of successful tech companies—what to do with its “legacy,” how to keep its “installed base” happy? That manifested itself primarily when the world moved to mobile computing and Intel was slow to adapt because its legacy architecture favored performance over battery power. “They said, we can’t give that [86 architecture] up because of the value of the software. But it doesn’t matter if I can run software if my phone only works for 10 minutes,” says Miller.

DEC and Ken Olsen got stuck in another dogma, that of the “structure follows strategy” business model of a “computer company,” also dominant since the early days of the industry: All computer companies must be vertically integrated, the “correct” business model that entailed producing everything in-house from semiconductors to software applications. But in the early 1990s, the industry has very rapidly gone through a transformation that created a new horizontal industry structure, with specific companies focused on (and dominating) specific horizontal layers: Intel in semiconductors, EMC in storage, Cisco in networking, Microsoft in operating systems, Oracle in databases.

Miller says that DEC had “all the ingredients of the new, next generation. But the next generation was horizontal. And so digital would have had to break itself up. They could have been Intel, they could have been Google. They had everything that exists now but they had it put together wrong.” And getting stuck was not (and is not) the privilege of successful founders and successful leaders. Even when the Olsen era was over, “they didn’t have anybody to lead it,” says Miller. DEC engineers were like “high priests, they were purists. They were focused on the technology without a coupling to the business. They didn’t have any understanding of it.”

Making sure you don’t get stuck (beyond just saying so) is one way to focus the mission and investments of today’s corporate venture capital firms. Treat the function as the corporation’s science lab and corporate VCs as scientists, always aiming to refute the existing hypotheses, assumptions, and models on which the current business of the corporation is based.

And like good scientists, they should also understand the value of history’s lessons and embrace the notion that you could see far into the future only if you stand on the shoulders of the giants that preceded you. Miller is surprised at the lack of curiosity and interest in the past prevalent among some of today’s business leaders. “As far as Larry Page is concerned, the world started the day he started Google and nothing else matters,” says Miller. “In my generation, I think we were interested in what happened before.”


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