What is Swisscom Ventures’ overall investment thesis?
We are the corporate venturing unit of Swisscom group, which is a telecommunications and IT company based in Switzerland, so strategic impact is what we ultimately aim to achieve, on top of good financial results.
We invest in core telecom and IT services, in technology that will emerge in that space and transform our business within the next three years. We also invest in technologies that manage customers and improve customer experience. Then we try to discover new areas of growth which will emerge within the next three to five years for Swisscom.
That is why we have been taking some bets in areas which seem, at this point, remote but are getting closer to the core business of Swisscom, such as eHealth, the internet of things, artificial intelligence, wearables and even fintech.
So, overall about half of our investments are important new technologies bringing efficiencies to our industry, while the other half is comprised of technologies that will or may become important to us, thus giving us differentiation in the broad customer management and experience field.
What is Swisscom’s ideal investment case?
We like to invest in companies that are piloting and doing a proof of concept with Swisscom. Without knowing for sure whether it will be a big thing or not, we take that risk at the initial stage to support such companies and when they do take off, we roll out and help them find telecom customers worldwide. Investing just before the inflection point triggered by the first customer rollout is our ideal investment case.
Swisscom Ventures invests in companies at every stage of development. Given this stage-agnosticism, what is the role of financial and strategic returns at Swisscom Ventures?
Having good financial returns is a prerequisite. We have been active for 10 years and we are happy to have obtained positive financial results which compare well with other VCs, so this gives us credibility within our organisation, allowing us to take risky bets and [meaning] we are also listened to more. So the financial dimension is very important from that standpoint.
It is important to hold a long-term perspective and not worry about our survival every year but rather think in terms of decades. I think financial and strategic returns are both complementary. I would not oppose one against the other, they are both equally important.
How has Swisscom Ventures evolved over time?
When we first started off 10 years ago, it was all about strategic value creation but over time the financial performance becomes more tangible. That is when you need to deliver financial value to remain credible. It is the balancing act between the financial and strategic dimensions, between more or less mature businesses and between core business areas, like telecom and IT, and long-term adjacent ones.
This act of balancing is more an art than a science. This is why we have diversified our investment into over 40 different companies over the past 10 years to find out which space we feel most comfortable with, both from a strategic and financial perspective, and to reduce risk.
Swisscom Ventures operates three funds. How would describe each of them in quantitative and qualitative terms?
We have an evergreen model and currently have between CHF10m to CHF20m ($10.2m to $20.4m) per year to invest, increasing the amount of capital invested every year, as we sell more and more companies. Two of the funds are focused on our home market Switzerland and one of them is internationally-oriented.
The international fund focuses on technologies that are developed in collaboration or piloted with Swisscom, or on cases where Swisscom is a potential customer of such technologies. Internationally, we are very picky because we want to have a true value-add as a potential customer for the technologies. This way it is far easier to justify investments very far from home.
We have done about 20 deals abroad, mostly in Silicon Valley. In this process, we gain credibility as we get to be an active part of the commercialisation process of those technologies afterward. We help startups that develop them go to other telecoms or enter the European markets.
In Switzerland, we take a broader approach because we have a strong brand presence here, which allows us to justify an investment and not only as a potential customer of the technology. We can provide access to our commercial base, to our technical infrastructure, etc.
That is the reason why in Switzerland we are exploring a number of areas where Swisscom is not active. That is also our way to contribute to the local technological ecosystem.
How do you see the Swiss startup and innovation scene?
Very vibrant; small but world class in certain areas, such as biotech, medtech, nanotechnologies and also eHealth, where we link digital technologies with biotech or medtech. We are also traditionally good at anything using small mechanical parts, so that inevitably touches the fields of robotics and drones.
Swiss startups are also strong in anything that requires transversal knowledge across various functions and industries. Switzerland is ranked number one country in the world in terms of innovation and competitiveness, with lots of major R&D centres spread around the country, such as Google’s or IBM’s.
We piggyback on this strong IP base. To be sure, Switzerland is not an internet cluster, even if the World Wide Web was invented at the CERN in 1989 in Geneva, but we do not compete with the internet mega startups and players. Swiss entrepreneurs tend to specialise in niches or verticals where they have an advantage.
– This article represents an edited version of the interview. The full version is available here.
