Tell us about yourself.
I have worked with emerging technology companies my whole life. I started my career designing and building software and hardware systems at Fujitsu, completed an MBA and joined the venture capital industry in 1998 at Macquarie Bank, which was just starting to raise a fund. Investing through the dot.com days was amazing. We had some spectacular successes and some spectacular failures.
I then joined Deutsche Bank Capital Partners, where we managed a $2bn private equity portfolio. In 2006 I had the opportunity to complete a buyout of the Australian venture capital portfolio, which resulted in a boutique VC firm called Accede Capital, where I was the founder and majority shareholder. I joined Telstra Ventures in late 2011 when it was just being launched.
What relationship does Telstra Ventures have with the parent company?
Telstra Ventures is a wholly-owned subsidiary of Telstra, Australia’s largest telecoms and information services company with a market cap of around A$60bn ($45bn). Telstra Ventures was established about four and a half years ago, and our mission is to serve Telstra’s customers and business units by investing in market leading, high-growth companies. We are looking for world-class innovation across a range of thematic areas which are strategically relevant to Telstra and Telstra’s customers.
How is Telstra Ventures structured?
While Telstra Ventures is a separate company, we are essentially investing on Telstra’s balance sheet. Our investment decisions are made by the Telstra Ventures board, which consists of the two managing directors at Telstra Ventures and some group executives from Telstra. This structure was chosen to create some separation from the parent company, and also to provide Telstra Ventures with the flexibility it needs to operate.
How much has been invested so far?
Since its inception, Telstra Ventures has invested about $300m in 34 companies around the world, of which 17 are in the US, 10 in Australia and seven in Asia. We have reviewed more than 4,000 investment opportunities over this time. In the last financial year, we considered 1,284 opportunities, which resulted in 11 new investments. We both lead and follow investment rounds. Over half of our portfolio consists of investments we led, and we often join the board of directors of our portfolio companies. We are a big believer in co-investing with like-minded venture and corporate investors.
What key technologies and new business models do you see as an opportunity or threat to your business?
The telecoms industry is going through significant changes. Innovation and disruption are coming from all directions, so many large corporations like Telstra are investing in leading emerging companies to learn and adapt. Some key technologies we are investing in include cloud, apps, next-generation infrastructure, content delivery, unified communications, video, adtech and cybersecurity. We are also interested in broader areas such as the internet of things, application programming interfaces (APIs), big data, artificial intelligence, drones, fintech and healthcare IT.
Tell us about your team. How do they engage with people from the core business?
Telstra Ventures consists of 17 full-time people, of whom 10 are investment professionals. In addition, we have access to many great resources in legal and other support functions. Telstra made a wise decision at the time that Telstra Ventures was established to create a team that included people who really understood venture capital investing, and also people who really understood Telstra. Our team therefore includes a number of people who were recruited externally, who have a lot of investment experience, and also a number of very successful Telstra executives who have built and managed sizeable businesses.
Our team is based in California’s Silicon Valley, Australia and China, but we all travel extensively to where the deals are. Our remuneration is tied to both business performance metrics and returns from the investment portfolio.
How does your team work with people in the core business with regard to governance, validating investments and connecting the investment portfolio with business units or IT in the firm?
Telstra Ventures follows the investment philosophy that when we invest shareholder funds, we need to leverage Telstra’s assets. We therefore typically have a business unit sponsor for our investments. The scope of this sponsorship can be quite broad and is very specific to the deal and stage of the company.
As part of our due diligence process, we usually involve the sponsoring business unit to validate the technology and the commercial opportunity. For Telstra, a compelling model is one where Telstra can be a user of the portfolio company’s products, and also act as a distribution channel for the product into Telstra’s customer base. This can be very powerful. Across our portfolio, Telstra has generated over $100m of revenue for our portfolio companies to date with this model.
Where in China have you invested and formed partnerships, and what is your view of the technology and business environment there?
Telstra has been an investor in China for many years, long before Telstra Ventures was established. A very successful investment for Telstra in China is Autohome, China’s leading online automotive site.
Telstra Ventures has made two investments in China over the past year. We are very excited about the opportunity there. The rise of entrepreneurship has meant that China has become the second largest venture investment market in the world, and is increasingly competing directly with the US as the world’s centre for technology and innovation.
We recently announced a strategic investment in Beijing-based Cloopen, a leading provider of Chinese communications APIs that enable developers to integrate messaging functions, video and voice calls in their applications. We have seen strong growth in APIs and the over-the-top application sector in China. Given the complex nature of the telecoms infrastructure in China, and different local policies and business practices in each province, Cloopen meets the need among application developers for simplified communications capabilities.
Give us an insight into investing in China – what does it take to succeed?
Telstra Ventures’ investment strategy in China is to seek out outstanding entrepreneurs, world-class technology, rapid and sustainable growth in the business, credible local co-investors and a strategic connection to Telstra. Our preference is to invest in later-stage companies with an established team, product and trading history. We have a highly experienced investment professional in China who is deeply connected to the Chinese venture capital and entrepreneurial community. It is critical to have someone with this experience on the ground in China.
Tell us about the key challenges you see in your business amid technological change.
Like most players in the telecoms industry, Telstra’s core business has changed dramatically from providing fixed-line telephone connectivity. Telstra has a track record of embracing new technology, operating the first 4G mobile network in the world, for example.
One of Telstra Ventures’ objectives is to source and introduce new technology and innovation to Telstra. Given the significant shift from voice calls to mobile data, traditional billing systems are no longer suitable. One of our investments is in a company called Matrixx, which offers a next generation, real-time billing platform now being used by Telstra to improve customer service for mobile customers.
Another example is an investment in Cohere Technologies, which is developing the 5G mobile phone standard. Cohere is working closely with Telstra’s network engineering team on the 5G standard, providing Telstra with better insights into the 5G standard process and technology evolution.
How does Telstra Ventures measure financial and strategic performance?
Telstra Ventures’ performance is measured on the amount of deals we source, the amount of capital we deploy, the investment returns of the portfolio, our operational cost and the strategic synergy revenue generated through Telstra for our portfolio companies.
Give us some examples of recent investments or partnerships.
Whispir is an Australian cloud-based software provider that helps businesses manage complex communications challenges posed by planned and unplanned events such as emergencies, stock exchange disclosures and IT disaster recovery. Telstra and Whispir have successfully partnered to win a number of new customers in Asia.
DocuSign is a Silicon Valley-based world leader in digital signatures. Telstra and DocuSign have successfully implemented this solution internally within Telstra, and also with a number of Telstra’s enterprise customers.
We have also just announced an investment in C88 Financial Technologies, which owns and operates the largest consumer financial websites in Indonesia and the Philippines. This investment strengthens our presence in Asia, increasingly a source of world-class digital innovation. It also creates opportunities for collaboration based on the enterprise services Telstra provides to financial institutions across Southeast Asia and through Telstra’s joint venture in Indonesia, Telkomtelstra.
You can listen to this and other interviews on a podcast available at gaulesqt.podomatic.com
Andrew Gaule leads the GCV Academy, developing the capabilities and expertise of organisations leading open innovation, venturing and corporate venturing programs to drive strategic benefit. He also supports innovation programs and collaborations in “innovative new value chains” in global organisations.
To contact Andrew Gaule and for future interview ideas, email andrew.gaule@aimava.com or James Mawson, jmawson@globalcorporateventuring.com