The Operator Start-up Connection
(no online version available)
(co-authored with Audrey Mandala — distributed at Mobile World Congress 2012)
Plain text version:
It’s no secret that Europe’s largest mobile
operators — Vodafone, Telefónica,
Orange, and T-Mobile — have long been
keen investors in some of the telecom
sector’s hottest start-ups.
Deutsche Telekom’s venture capital
subsidiary T-Venture, for example, has
been active since 1997, and is one of the
most significant corporate venture capital
companies in the world. Innovacom,
France Telecom-Orange’s venture arm,
started investing in early-stage startups
in 1994. It currently manages a fund
worth 400 million euros, and has supported
innovative telecom and information
technology start-ups such as Business
Objects, Gemplus, Infovista, Intershop,
Kelkoo, and LastMinute.com. Vodafone
Ventures has been on the scene since
2000, specializing in investments in seed/
start-up, early-stage, and mid-stage in
wireless and Internet sectors. (See table.)
But recently these mobile operators
have started to look beyond traditional
venture investing to find new ways to get
closer to the innovators that are creating
new services and new markets, and
in some cases disrupting the operators’
core businesses.
Take Telefónica Digital, a relative newcomer
in this space. The Digital business
unit was set up in September 2011; its
mission is “to seize the opportunities
within the digital world and deliver new
growth for Telefónica through R & D,
venture capital, global partnerships and
digital services.” In November 2011, Matthew
Key, Chairman & CEO of Telefónica
Digital, told a London conference crowd:
“…we’re not going to be able to keep, own
and build all of that capability internally,
so we have to partner with people to do
joint ventures and equity investments
with different companies that have different
capabilities….We have to move into
the future rather than protect the past.”
Over the holidays, Telefonica Digital
agreed to take a stake in U.S.-based cloud
computer experts Joyent, which counts
LinkedIn, THQ, Gilt Groupe and Kabam
among its customers. “We all felt pumped
at the prospect of moving forward with
our global domination strategy,” says David
Young, the company’s CEO.
Telefónica was not the lead investor in
the round, though; it terms its investment
in Joyent as “strategic: the operator will
use Joyent’s technology expertise in cloud
computing to help Telefónica enhance
its own product offering. The relationship
will also help Joyent with its “global
domination” plans, given Telefónica’s
multinational reach.
Telefónica also recently launched a
seed capital fund for Latin America with
co-investors, called Amerigo. The most
interesting move Telefónica has made in
the start-up arena, however, was the creation
of the Wayra incubator/accelerator.
Wayra, which means “wind” in Quechua,
started in Latin America, as a way
to help local start-ups establish and grow
their businesses in their home markets.
Wayra provides financing of between
$30,000 and $70,000 in exchange for a
small stake, depending on a start-up’s
level of maturity and need. Wayra then
works with these small players, mentoring
their leaders in business and technical
skills, providing co-working space, and
helping them access further financing
when required.
Wayra supported more than 6,000 startups
in Latin America in 2011.. The initiative
was considered so successful that hubs will
be rolled out across Europe in 2012 from
Spain to the UK and Germany.
The benefits for start-ups in partnering
with mobile operators are amply demonstrated
by a T-Ventures success story,
6wunderkinder. This German-based
company produces productivity tools that
reside in the cloud and are accessed from
smart phones, tablets and computers, allowing
distributed teams to stay in sync.
After the company’s first nine months of
operation, 6wunderkinder had produced
a free-to-use task manager and garnered
nearly one million users. It then partnered
with T-Venture and in less than a
year its app had been downloaded more
than 5 million times. The T-Venture funding
also helped 6wunderkinder develop
its second product, a pro version of the
task manager that incorporates private
workspaces and social networking tools.
“We are looking for companies who are
scaling up and going global, because that’s
when we can help them the most,” says
Heikki Makijarvi, Deutsche Telekom’s
Senior Vice President of Business Development.
“[When we find them] we will
work very closely together with them.”
Vodafone is another mobile operator
that recently took its start-up activities
up a notch. In September 2011, the
mobile operator created Xone, a Silicon
Valley-based R&D center that will help to
identify and assess potential investments
for the Vodafone Ventures group. Xone
will also provide incubator services for
roughly 25 companies at a time. Start-ups
in the Xone will be able to test their services
on the Vodafone network, and work
closely with Vodafone’s own engineers
and R&D team to roll their solutions out
to the market more quickly.
Another Vodafone innovation is the
Vodafone Mobile Clicks contest. One
of the biggest start-up competitions in
Europe, the initiative is designed to accelerate
innovation in the mobile Internet
sector across Europe.
Last year was a very busy investment
year for all four of the mobile operators,
and 2012 is starting to look the same.
Vodafone kicked off the year by participating
in the second phase of the Series
C private equity fundinground in VOSS
Solutions, a cloud fulfillment technology
company. T-Venture also started 2012
strongly, with an investment in the online
video content provider, clipkit.
Some carriers are even launching
new funds to give them better access to
the next big thing. In November 2011,
for example, France Telecom-Orange
announced plans to launch a new venture
capital fund focused on the digital
economy. FT-Orange and Publicis Groupe
have committed to jointly investing 150
million euros in the new fund, and have
invited other investors to join them, to
reach a target of 300 million euros. This
activity is in addition to France Telecom’s
18-year-old Innovacom VC fund, and the
fairly recent Orange Ventures Investment
Fund, which seeks to invest across
the wireless value chain, from network
infrastructure, hardware, and equipment
through to middleware, devices, software,
applications, and services.
European mobile operators’ venture
investments, accelerators, and contests
will undoubtedly help mobile-focused
start-ups around the world develop more
quickly and efficiently. For the operators,
the start-ups could help them find new
revenue streams, run their own businesses
more efficiently, and, perhaps,
avoid being blind-sided by the disruptive
innovation generated by start-ups.