Meg Whitman, chief executive of Hewlett Packard Enterprise, sat down with her top lieutenants last month at the Palo Alto, Calif., headquarters to evaluate a technology storage company and a data-center-tools startup.
She analyzed product details, asked about capital expenditures, and wondered about energy efficiency. The businesses, though, aren’t the billion-dollar acquisition targets that her company has been known for. They’re startups hoping to win investments from HPE’s venture capital arm.
Putting money into startups is a way for the company to contend with new technologies from rivals like Amazon.com Inc. and Google. It’s also an effort to end a checkered spending pattern on acquisitions in the past decade.
The business is still making purchases — it acquired Aruba Networks for roughly $3 billion last year — but venture investments provide an opportunity to make cheap bets on promising companies.
HPE’s VC arm aims to do about 10 to 12 deals annually and has already closed a couple this year.
“The stakes have gotten very high for them,” said Crawford Del Prete, an analyst with IDC. “It’s just a low-risk way to see if those companies play with where HP’s strengths are.”
The Hewlett Packard Ventures program, also known as Pathfinder, is targeting startups that focus on big data, security, and the cloud and data center.
Lak Ananth, managing director of the group, said it intends to invest about $100 million this year. That would roughly match what it gave to startups in 2015, its first full year. The company might invest $5 million to $10 million in an expansion-stage round — and potentially invest more in later rounds, according to Ananth.
Whitman is personally involved. Every quarter she hosts “Coffee With Meg” gatherings, listens to presentations from startups, asks pointed questions and helps decide who will get the company’s money.
Her engagement has been key for Florian Leibert, CEO of Mesosphere, a data-center software provider that raised $73.5 million in March, led by HPE.
“That was a big reason why we were really excited,” he said. “She continues to be really responsive.”
Whitman’s VC push comes after witnessing huge write-downs that cost the company more than $15 billion early in her tenure. In 2011, under Whitman’s predecessor Leo Apotheker, HP announced it would spend $10.3 billion on British software maker Autonomy Corp. A year later the company said it was writing down about 85 percent of Autonomy’s value. Also in 2012, it said it would write down about $8 billion after purchasing Electronic Data Systems four years earlier.
In November, HP underwent a massive corporate split. Now, Hewlett Packard Enterprise — which provides servers, storage gear and tech services — is counting on the smaller, nimbler structure to better navigate the fast-changing corporate tech market.
Pathfinder is a way for HPE to be involved with more experimental ideas and products. It’s not aiming for VC-style returns, though it doesn’t want to lose money, either, said chief operating officer Chris Hsu.
“The purpose of this is for us to actually be in the market all the time, understanding the emerging technologies,” he said.
