Dell has launched a $100 million credit program designed to help startups finance technology purchases from Dell. The new Dell Innovators Credit Fund provides fledgling angel and venture capital backed companies a maximum of $150,000 or 10 percent of their funding in credit to acquire Dell Solutions. According to Dell, the goal of the new fund is to allow startups to invest in technology critical for driving innovation without consuming equity capital critical for other business purposes. According to me, Dell just created a new market for its products with customers supported by its own money.
Participants receive potentially easier credit terms, a dedicated Dell sales team and premium hardware and software support. Dell gets interest payments, higher sales numbers and a potentially profitable long-term relationship. It’s a win-win; at least one of the initial participants, Current Motor, thinks so. The company’s executive chairman said Dell’s credit program provided a single point of contact and allowed Current Motor to obtain technology that ultimately helped accelerate the delivery of their electric scooter by six months. Dell has already pre-qualified several companies for the fund and is accepting applications from additional startups.
This might be a step on the path toward Dell reviving its long waning venture capital arm, Dell Ventures. News circulated in December that Dell was breathing new life into Dell Ventures. An empowered venture capital division could help drive acquisitions and speed Dell’s transition to a services company. The Texas-based computer maker is certainly not the first or only technology company with a portion of its business dedicated to funding customer purchases of its own solutions or new companies.
IBM has a venture capital unit and a program that provides free software for three years, mentoring and technical enablement to startups – IBM Global Entrepreneur program. Citrix launched a startup accelerator in celebration of the fifteenth anniversary of its IPO in December 2010. The accelerator provides early stage startups a maximum of $250,000 in seed capital, office space for 18 months, access to Citrix partners, customers, staff and technology as well as support for participants’ next round of funding.
Why are so many technology companies choosing to help and offer resources to what may be their next competitor? It makes good business sense. Most startups that get a kick-start don’t become competitors to their larger sponsors; they become partners, customers and future acquisition targets. In addition, if the startups are successful, investing companies may earn a percentage of profits or gain early access to technology. As markets consolidate, we will likely see even more startup initiatives by established companies. However, only time will tell if the trend results in a thriving startup ecosystem or further market consolidation.