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Dell unit to assist start-ups with IT

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Michael Dell’s net worth is some $17 billion, making him the richest person under 40 in the U.S. While most of that wealth comes from the hypergrowth of Dell Computer Corp.’s stock, some comes from his personal forays into venture capital investing. Now, he stands to make even more through a new venture capital assistance unit being started by his company.

Dell Computer recently introduced VC Direct, a division that will team with venture capital firms to provide their portfolio companies with Dell technologies, Web hosting and IT consulting services--all at discounted rates. Dell will not take equity in these start-ups; it already does that through its stand-alone VC unit, Dell Ventures.

The idea is that Dell will get these start-ups to use its servers, PCs and consultants, with the expectation that at least some of these fledgling companies will take off. Their ordering of Dell products and services will take off as well, said Tom West, director of marketing and business development-Internet partner division. ‘‘IT is a core success factor for venture capital firms’ portfolio companies,’’ he said. ‘‘Until now, we didn’t have a program specifically to support them.’’

So far, Dell has teamed with Austin Ventures and Kleiner Perkins Caufield & Byers, both elite, $1 billion-plus VCs with early-stage, b-to-b focuses. Over the next year VC Direct intends to sign deals with at least 23 more VC firms, West said. ‘‘To participate, you need to have at least $1 billion in assets under management,’’ he said.

At least one VC industry watcher sees Dell’s move as shrewd. ‘‘If one of these start-ups does take off, it could mean literally thousands upon thousands of servers sold for Dell,’’ said Kevin Knox, research director at Gartner Group Inc.

Others are less impressed. ‘‘I don’t see it,’’ said Marc Kramer, president of e-business consultancy Kramer Communications, Downington, Pa. ‘‘Computers are so cheap anyway. The kind of help these [start-ups] need is the setting up of strategic alliances for them,’’ he said.

One thing is certain: While other Fortune 500 tech companies, such as Hewlett-Packard Co., have started similar projects, none is as extensive as Dell’s. It is a novel plan that, if successful, could reap billions of dollars in revenue for the Round Rock, Texas-based company. And unlike typical venture capital investment projects, there is not much to be lost. It cost Dell little to start VC Direct, and whatever it sells through it is gravy.

Speed to market

Ed Olkkola, a general partner with Austin Ventures, said VC Direct’s value to his firm is immense. ‘‘There are lots of challenges for companies in the start-up phase,’’ he said. ‘‘If you can just hand IT off to the Dell program, it’s one less thing to worry about.’’

VC Direct also helps quicken the all-important speed-to-market process, said Olkkola, whose firm has about $1.6 billion invested in Vignette Corp., Agillion Inc. and other b-to-b companies. ‘‘It shortens the time it takes for our companies to get productive. Without tech systems up and running quickly, it just slows things down,’’ he said. ‘‘Shortening the process by a week or even three weeks in getting a company off the ground is a huge advantage to us.’’

Dell also intends for VC Direct to be a big marketing advantage, West said. He noted that partnerships with 25 or more VCs could mean Dell getting its name and products in front of 3,000 to 4,000 start-ups.

While there are no plans for traditional advertising to tout the program, the company views it as a core marketing opportunity, West said. ‘‘It’s very much a direct marketing program for us,’’ he said.

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