Prof Juan Roure and Juan Luis Segurado from IESE business school hosted the Global Corporate Venturing Connect corporate venturing meeting in Madrid, with registrations from Amadeus IT Group, Banco Sabadell, Bankia, Caixa Capital Risc, Ferrovial, Fundacion Endesa, Globalvia Infraestructuras, Iberdrola, IBM, IMDEA Energy, Naturgy, Orange, Repsol Corporate Venturing, Santander and Telefónica, it was the Spanish business elite in their favourite home. Special thanks also to Kaloyan Andonov and Liwen Edison Fu from GCV’s Madrid office for coordinating the partnership and preparing the data.
Gonzalo Martín-Villa, chief innovation officer (CIO) at Spain-based telecoms firm Telefónica, was interviewed on stage by Juan Roure, professor of entrepreneurship and negotiation at IESE Business school. The interview will form the basis of a case study on corporate venturing being developed by IESE.
Martín-Villa told the audience that, despite his background in law, he took a CIO position, as he had always enjoyed driving change internally through his 21 years in Telefónica. However, the primary push to enhance the corporate innovation kit through startups was feedback received from customers requiring more innovative products and services.
Martín-Villa said that was the reason behind investing up to €50,000 ($56,000) in startups when Telefónica´s Wayra accelerator program kicked off, initially writing cheques mostly on a one-size-fits-all basis. He also pointed out that the program had been a valuable learning tool, highlighting the importance of involving C-suite members early to demonstrate the value of technologies that may reach a level of commercial viability within three or more years.
However, convincing startups to trust Wayra was no easy task, as the first instinct of founders was to distrust the intentions of an industry incumbent such as Telefónica. So Martín-Villa and his team quickly learned some fundamental best practices for corporates working with startups – not to demand commercial exclusivity or show intentions to acquire an emerging business.
Wayra and the innovation toolkit of Telefónica have evolved since their beginnings and so has the company’s culture. In addition to Wayra, which can now supply of up to €150,000 per startup, Telefónica also runs a venture capital division with 12 portfolio companies, and its Amerigo fund – a fund of funds committing capital to traditional VC funds that cover areas of strategic interest for the company.
In Martín-Villa’s words, Wayra has become an “open door for startup founders who do not know who to talk to in Telefónica.” The contact with startups, he said, had led to a further internal engagement within Telefónica. On its inception, Wayra needed experts to evaluate startups’ pitches, so they were sourced internally via a platform dubbed “Wayra Friend”, which allowed corporate employees around the globe to participate in the process.
Martín-Villa also placed an emphasis on using proper key performance indicators for an innovation initiative. He pointed out that the two most important indicators at Telefónica were the amount of revenue the corporate parent obtains from startups’ products as well as the money impact from partnerships and other agreements for introducing startups’ products or services internally.
He said valuations were, in principle, important but less so than a startup’s strategic fit, pointing out that even in exit transactions with truly large returns, the impact on the corporate’s bottom line was negligible.
This balance between strategic and financial returns is at the heart of many corporate venturing units’ creation issues.
In two case studies and a question and answer session, Paul Morris, head of the GCV Academy, led a discussion with Suzanna Chiu, head of Amadeus Ventures at Amadeus IT Group, and Pedro Irujo, former founder of Cemex Ventures, the corporate venturing unit of Mexico-based cement company Cemex.
Amadeus Ventures and Cemex Ventures are both Spain-based – the former’s parent is located in Spain while the latter’s is in Mexico – and Irujo and Chiu talked about the advantages and disadvantages of physical proximity to the other business units. The characteristic they share is that neither of them is based in entrepreneurial hubs such as Silicon Valley or London.
Amadeus Ventures had invested in 12 portfolio companies at the time of the discussion, with another expected soon afterwards, while Cemex has backed eight.
Regardless of location, they agreed that a close relationship with the senior management team and the parent organisation’s business units was imperative when setting up a CVC unit. They also stressed the importance of formulating specific metrics and key performance indicators concerning strategic values.
Chiu said the focus was not on number of deals or amount to invest each year, but how many could be digested at a suitable maximum exposure – in Amadeus’ case €3m.
