As activity around corporate venture capital (CVC) for mobile operators ramps up in emerging markets, the GSMA Ecosystem Accelerator program and advisory and investment company Delta Partners have co-authored a report which examines the motivations for mobile operators to pursue startup investments in emerging markets, the merits of minority investing for mobile operators, and the benefits it can bring to startups and local ecosystems.
The report found that by leveraging their assets and experience, mobile operators can support startups in their day-to-day operations in emerging markets by helping with issues such as missing market data, lack of trust or brand visibility, limited availability of customer information, partial reach of distribution infrastructure and a smaller proportion of adults using traditional financial services.
The report hence concluded with a recommendation that mobile operators in emerging markets further explore the opportunity of setting up CVC arms and invest in local startups as a way to play a stronger role in the ecosystem, especially as tech investment is still nascent in emerging markets.
The amount of tech venture capital investments across Africa in 2015 was about $188m, compared to over $34bn in California alone. But trends are positive for mobile carriers.
Earlier this month, Safaricom announced the third investment from its corporate venturing fund, Spark. The Kenyan mobile operator invested in local edtech developer Eneza Education, having previously backed Sendy and mSurvey.
On a different scale and in a different geography, Japanese mobile operator Softbank had led a $750m round for Southeast Asian ride-hailing app Grab a few weeks earlier.
Beyond the direct financial impact, financial backing from mobile operators can lend substantial credibility to a startup, not only with other investors, regarding financial reassurance, but also with governments in terms of smooth legislation and regulatory frameworks, as mobile operators in emerging markets are often among the largest private sector employers and taxpayers, the report said.
Nuno Goncalves Pedro, partner at Delta Partners who co-authored the report, said: “Mobile operators in emerging markets can and should be more active in their support of the startup ecosystem, in particular those startups that are local to them.
“To play more actively in the investment arena, not only creates commercial benefits for those involved, but also, from a socio-economic perspective, it can have a number of positive outcomes such as increasing employment, boosting the quality of the local labour force and ultimately fueling local ecosystems.”