29 January 2001
25 November 2013
31 March 2014
15 April 2014
13 January 2014
20 December 2013
Organisation: Intel Capital, Asia Pacific
Legal capability: Five
Head of legal: Michael Scown, regional general counsel, Asia Pacific
Reporting to: Suzan Miller, general counsel for Intel Capital, based in the US
Main location for lawyers: Hong Kong
Main law firms in Asia: Deacons Asia, Deacons Australia, Denton Wilde Sapte and Squire Sanders & Dempsey
Intel Capital is the venture capital arm of US silicon chip giant Intel. It invests in technology start-ups and companies and exists primarily to add value to Intel's core products, strategies and undertakings. It is big business - at the end of the last quarter, it had invested $6.8bn (£4.65bn) in nearly 500 companies. The arm also undertakes M&A activities on behalf of Intel; in other words, it is not averse to buying the ventures it has invested in.
Intel Capital Asia Pacific is the Asian arm of the company, rather like a little bit of Silicon Valley nestling inside the Asian hubbub of Hong Kong. The rather confusing chain of command from the US to Asia works as follows: Intel is parent company to Intel Semiconductor, the Hong Kong company that employs everyone at Intel Capital, Asia Pacific. Intel Capital, however, is a global outfit with its headquarters in the US.
The Asia Pacific arm has a five-strong in-house legal team, led by regional counsel Michael Scown, who in turn reports to Silicon Valley-based general counsel Suzan Miller. All five of the Hong Kong team are transactional lawyers, and while they may be living the West Coast dream of funding the technology of tomorrow, they drive a hard bargain when selecting external law firms.
Scown refuses to discuss the individual firms which advise Intel Capital, but does say that the company has close relationships with firms throughout Asia. It is understood that it also calls on Clifford Chance and Gibson Dunn & Crutcher should it need specific UK or US advice respectively.
It tries to use more than one firm in any one region to avoid conflicts - its main Asian firms are believed to be Deacons (both in Asia and Australia) and Denton Wilde Sapte. It also uses Squire Sanders Dempsey in Japan, although the original relationship came through Deacons Graham & James. When the association between the Asia Pacific and US firms ended, Graham & James in Tokyo merged with Squire Sanders & Dempsey and the relationship continued.
But all the firms had to undergo an extremely tough selection process. Scown explains that the first step when looking for external advisers is to take soundings from local companies. "We then go into a number of firms and get a feel for their experience with venture investing: how familiar they are with US securities law, how credible they are on technology and, to a large extent, what sort of fit there is," he says.
The ultimate goal is "to build a process that can service the deal flow", and in Scown's view this can be done only through an incredibly tight relationship between in-house and external lawyers.
This potential relationship, therefore, also comes under the spotlight. "Most of the work is internal, so we want people to be comfortable with that, with them taking a role on the deal team," explains Scown. "We like to meet the partners and the assistants who may be doing the work."
After these initial stages, firms are brought in for training, which covers the basics of what the company is about. It also tells the firms what to expect and, says Scown, "how we're going to work with them".
On the first couple of deals, Scown watches over the firm's shoulder. After that there is more training, which this time round can last as long as two days. Once all of the training is completed, firms will be reviewed on average twice a year.
Scown refuses to be drawn on legal spend, but does stress that while costs are important, they are not as important as making sure that the firms understand and work in the Intel Capital way. Plus, Scown argues, while he may drive a hard bargain on costs, he is able to assure firms they will get deal flow in return.
Scown concedes that it is a hard selection process, ultimately leading to an intense relationship between client and firm. But he adds that firms always have the opportunity to give their input and, once established, he would not want that partnership jeopardised. "We'd hope to have a long-term relationship," he says. "We've made a commitment to training them, getting them to understand, and to really integrate."
Like any other technology, media and telecommunications company, Intel Capital has witnessed a volatile year, and Scown expects the next 12 months to be very different from the buoyant times of the past. He says: "As the market contracts, I think it's going to be hard for some of these firms to raise money. Valuations have come down, but lending was too easy and expectations were too high."
But for the time being at least, those firms which have already passed muster and have proved that they can do things the Intel way can rest easy. n