Start-ups continue to drive corporates wild with interest. The reason is simple: a new company class called start-ups are growing like crazy with incredible valuations whilst traditional commercial enterprise, be it telcos, automotive or banks look on with bulging green eyes. Ubers, Teslas and Netflixs have made their traditional corporate competitors very envious and clearly nervous. So what to do?
One large corporate saw this trend early and decided to meet it heads-on: it started a program connecting the corporation – via investment or straightforward human engagement – with start-ups, entrepreneurs and tomorrow’s geniuses. Telefonica’s Open Future, of which Wayra is the core startup project, is the largest corporate venture program in the world and it has helped the fourth largest telco to remain vital and relevant.
Wayra, Telefonica’s start-up accelerator, is active in 11 countries and to date has accelerated more than 650 digital companies.
The Munich business is currently scouting for new teams. We went to the land of laptops and lederhosen to see what the managing director Garan Goodman has to say about start-ups, Germany and of course the Telco.
Crazy times for Telcos right now?
Explain crazy, would you?
Competition, market fragmentation and every man and his dog offering communication platforms that threaten your dominance.
Yes and no. Yes, because as passionate technology geeks we are constantly seeking the best new thing to bring to market, and the competition for brains and creativity is extreme. No, because we have a stable and fairly vanilla business that simply needs hard work and focus. Which we do pretty well, serving 46 million customers.
Right! And we saw lots of cool new O2 marketing coming into town. Looking tight! But let’s try to understand more about you guys being passionate technology geeks. Sounds great but what are you talking about?
Clearly I’m talking about our business, Wayra Deutschland GmbH, which is focused on locating, investing and accelerating the brightest teams in close cooperation with our partner Telefónica. In the past corporates thought that having a bunch of cool engineering dudes sitting in a colourful office would be enough. That the drive of bright and passionate people would transplant itself into the corporate bloodstream, infecting otherwise bored and stagnant colleagues with the same entrepreneurial symptoms. Suddenly all that angst about not being cool enough and losing relevance would be cured. Well it didn’t work. It wasn’t enough. Not surprisingly, the corporate is simply too resistant to outside influence.
Yes I’m with you. Corporate accelerators are not a new idea. I believe US firms where running programs back in the 1950s. Wasn’t Xerox’s Palo Alto Research Center one of the first giving us much of what we take to be normal computing interface functions such as the mouse and windows?
You are right. As a digital industry in 2016, we are now in the third iteration since the original dotcom boom in 2000. With each round the strategy and the business case becomes clearer and the board support widens to beyond just the CEO. Simultaneously, the quality of the start-ups interested in joining goes up. Corporate can be cool, they think. We certainly saw that at Wayra. Successes such as Foodora, Neokami, Parkpocket and Zyncd inspire top start-ups to approach us; they wouldn’t mind having those opportunities, too. On a weekly basis we meet entrepreneurs with genuinely brilliant ideas who want to join Wayra and most importantly want access to our giant mother, and she’s a big woman, Telefónica. Getting in, however, is tough, as our annual acceptance rate is in the low double digits. We only interested in a clear fit of the best ideas and the best teams.
That’s not good! You’re missing out on all that available talent which you’re not accessing!?
I know but in Germany we exist for clear strategic reasons: to support projects with teams that have a strong fit. That’s not new by the way and it’s how our colleagues operate in the other academies. Of course in Germany our telco is 95% mobile. Just to remind you we have 46 million mobile customers and only three million fixed line. For mobile we are almost entirely focused on a youth brand and digitally minded consumers. The merger gave us a huge new base of value brand consumers too.
So let me get this right: you invest in and work with teams which add a direct value to your business and who can benefit from a national and global telco? What about all the other amazing stuff happening which could disrupt and help innovate Telefónica Gemany?
Yes you are right. By having a very sharp focus we often have to turn away some excellent stuff. But that is our strategic focus right now and I intend to deliver on it.
We hear this increasingly from corporate accelerators. Any success stories?
Sure. Current cohort: Cadami fixes the problem of mobile video buffering. Walletsaver is a telco price comparison app, Saffe is a mobile payment app, Meshine is a mesh communications app, Netbeast is an IoT smart home developer’s platform. All of them are working, have lab trials or pilots with us at different stages. And all have had the chance to connect with us at a Global level in Madrid. There are also some teams from our alumni such as NF Ware (telco networks virtualisation) and Neokami (cyber security) and Parkpocket (big data for connected cars) that are working or have worked with us.
Impressive stuff. So what does all this cost a start-up?
Cost? I think the investment is loaded on our side. We invest around €100K including our acceleration services. We mentor and train the team for investment. We bring the team inside the telco both locally and globally. We get lab trials and pilots. All this costs between 7 to 10% depending on the maturity of the team. I come from a tech / telco start-up background and I know based on experience that our partnership can be life changing thing. Look at some of our investment success stories. Foodora raised €12.5M from Rocket Internet. Neokami raised $1.1M from the Relayr CEO Josef Brunner. Parkpocket raised €0.5M from Ulrich Dietz of GfK. There are many more.
What I’m saying is: we are able to both bring start-ups inside Telefónica to deliver cutting edge technology as well as help them raise investment. For 7-10% of a start-up’s value, at such an early stage, that gives traction and a runway. I’d say that is exactly what acceleration is supposed to be. And just to be clear its Data, IoT and Mobile tech that excites us most.
Sounds good – we’ll catch up in a year or so to see how it’s going. Thanks for talking to us.