Vodafone Lured To Silicon Valley To Energize VC Arm

Vodafone Group is focusing on a traditional high-technology hotbed after placing the head of its venture-capital arm near Silicon Valley.

While not a seismic shift for Vodafone's venture investing, it signals a desire to get a closer look at burgeoning technologies such as "Web 2.0" software and digital home networking, according to Peters Suh, president of Vodafone Ventures Ltd.

Five months ago, Suh moved from Vodafone's Newbury, U.K., headquarters to the Walnut Creek, Calif., offices, about a one-hour drive north of Silicon Valley, to reinvigorate what has largely been a passive corporate investment arm. Suh, who had been director of strategic projects, effectively replaced Alan Harper, who oversaw Vodafone's venture investing as group strategy and business integration director in the UK.

Part of his mandate, Suh said, is to oversee a more "proactive" engagement by Vodafone Ventures with innovative start-ups and potential VC firm partners, to help advance the parent company's interests. While five of Vodafone Ventures' investors remain in Europe, Suh said, two undisclosed individuals are assisting him in scoping out the scene in California.

Vodafone Ventures is still investing from a fund raised in 2000, Suh said. Dean Sirovica, head of Vodafone's research and development center in Walnut Creek and formerly in charge of Vodafone Ventures' U.S. operations, said the fund closed with GBP100 million.

Suh cautioned against predicting an imminent wave of new VC investments by Vodafone, noting that screening deals is only one aspect of his duties - others include overseeing local corporate strategy. But he confirmed that his moving to the doorstep of arguably the world's biggest venture-capital hotbed is significant.

"We were more reactive in the past few years, only if someone pushed us heavily would we look at a deal," Suh said of Vodafone Ventures' track record. As mobile phones have developed to look and function like computers, Suh said Vodafone decided to scope out start-ups with cutting-edge computing technology, rather than trying to build it in-house. "2006 is when we're getting our bases out there," Suh said.

Only a few of Vodafone Ventures' past investments, including those in mobile software maker SavaJe Technologies Inc. and enterprise software maker Clickmarks Inc., have been disclosed.

Suh said that the venture arm has made no new investments in the past year - but spurred by Silicon Valley-centric tech trends such as Web 2.0, which offers consumer-friendly Internet features that can cross over to mobile phones, Vodafone would like to find start-ups to fund either as independent entities or to prime for a future acquisition, he said.

The Bay area is not new territory for Suh. Prior to joining Vodafone's U.K. operations as director of strategic projects two years ago, he had been a managing director with private-equity firm Fremont Communications in San Francisco. In addition to heading the VC arm in Walnut Creek, Suh is serving as president of Vodafone's U.S. subsidiary, Vodafone Americas Inc.

Vodafone Ventures will commit to Series A and B rounds in start-ups, Suh said, though he said it has not defined what the size range of its individual investments will be. He declined to speculate on how many investments the firm will be making, saying only, "if we think it's truly innovative, we'll do it."

Suh described a potential Vodafone portfolio company as "a Web 2.0 company that we think has mobile legs, but they (the start-up) haven't focused on that yet." The primary selling point for a start-up looking for Vodafone's investment, he said, will be, "Is there a service that could stimulate (mobile phone) usage?"

In addition to Web 2.0 features, Suh said Vodafone Ventures is interested in investing in technologies that bridge entertainment between the home and mobile phones and in technologies that can decrease operating costs for carriers.

(This story originally appeared in VentureWire, a daily email newsletter that provides in-depth analysis on venture capital and high-tech start-ups. Dow Jones Newswires, publisher of VentureWire, runs select stories from the newsletter.)

-By John Letzing, Dow Jones Newswires; 650-496-1341; john.letzing@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 20th April 2006