Replacing the head of your corporate venture fund — especially if they have led the unit for two decades — can be a tricky business. For Swiss telecoms group Swisscom, the solution was to move from one unit head to three.
Dominique Mégret was head of group strategy for Swisscom when he set up Swisscom Ventures in 2004 and led the unit until February this year when he left to become CEO of portfolio company Ecorobotix. Rather than try to get a replacement from outside, it handed the reins to partners Stefan Kuentz, Alexander Schläpfer and Pär Lange who are now running it jointly as managing partners.
“It hasn’t changed that much,” says Kuentz. “That’s the beauty of it. Initially, we had Dominique as head of ventures but underneath, we were managing Swisscom Ventures like a partner organisation from the beginning, particularly when we started to grow the team.
“So, when Dominique left, we took over what he did and distributed the responsibilities among the three of us. And it was actually existentially important that we did it that way, because it kept the organisation in a stable situation. Dominique was the founder of Swisscom Ventures, he created that, and it was important to our investors because of the continuity in what we do here.”
The division of responsibilities means Kuentz is overseeing staff management and handling the unit’s relationship with Swisscom, while Schläpfer manages fundraising activities and Lange is tasked with quality assurance on deal flow and deal management along with Swisscom Ventures’ investment committee. The portfolio was allocated across the overall team.
This is not the usual way a succession is handled at the top of a unit, but Kuentz, Schläpfer and Lange have been at Swisscom Ventures for a combined 40 years, and it was that experience that meant they could sell Swisscom on a sense of continuity.
“For a corporate, it’s very unusual to buy into a concept where you have a partner organisation and a partner-led structure”
“For a corporate, it’s very unusual to buy into a concept where you have a partner organisation and a partner-led structure,” says Kuentz. “It’s really remarkable that Swisscom’s CEO and its top management signed up to have three bosses run an organisation like this and not one. But it wasn’t a big deal for them to say yes to that.”
Swisscom wasn’t the only stakeholder that had to be sold on the idea. The unit began raising money from external investors for its Digital Transformation Fund in 2018, and when it closed its last fund two years ago, over 75% of the capital came from limited partners like pension funds.
That fund closed at €300m and Kuentz says there are tentative plans in place for the next one. Each fund typically makes 30 to 35 investments and the latest has committed roughly half its cash. The rest is expected to be deployed within the next two years.
“We are currently preparing for the next fund but the plan is to go out sometime next year,” says Kuentz, who adds that the unit would like to tap more of Switzerland’s pension fund pool. “We haven’t decided on the structure yet but it will be a similar size to in the past. The first fund with LPs was €200m, the last one was €300m and it’s probably going to be in the same range.”
The next fund will also see a continuation of Swisscom Ventures’ evolution, with a new generation of partners becoming more prominent. Investment manager Semih Kaçan was promoted to investment director last year while Jennifer Webb was part of the GCV’s 2024 Emerging Leaders class.
“We’ve been doing this a long time now so we want to bring through the next team that will manage the funds beyond the next one,” Kuentz says. “We hired people years ago we want to bring through.
“Our belief is that you have to build this internally, not from a complete system level, but we hired many people on the manager level, brought them to director and we will bring them to partner. We feel like it’s important to grow the team from the strength that has been created in the past.”
For Swisscom, AI is like the early days of mobile networks
One thing that has remained relatively consistent is Swisscom Ventures’ focus. Roughly half of its investments are in interesting local startups and they are divided between telecoms and IT infrastructure technology, artificial intelligence and cybersecurity – the last two of which are now major growth areas.
AI is a priority for nearly every investor right now, and Swisscom is focusing, in particular, on its use for customer service. It is Switzerland’s largest call centre operator and is actively interested in technologies that can increase efficiency there.
Another area where it is looking for more efficiency is software development, as Swisscom runs multiple European IT development hubs. And Kuentz, who has now worked for a telecoms firm for over 20 years, sees a lot of common ground between AI and mobile communications, with one big difference.
“AI is in our case very comparable to mobile networks”
“AI is in our case very comparable to mobile networks,” he says. “But the difference is that if you look at mobile networks, the infrastructure was laid everywhere, through the telcos. Then, the enablers came on top of that.
“Right now, the ground infrastructure has been laid. But whereas in the past, it had been laid everywhere more or less by the carriers, [this time] it’s been laid with the hyperscalers and other parties that have a lot of money available.”
Swisscom Ventures has had a quiet year last year with just five investments last year, down from an annual average of eight. That was part of the wider bear market for VCs, however, and Kuentz says the pace is about to increase. The team has a few deals lined up that it is about to close.
“It was just a very difficult year,” he says. “We were much more focused on the portfolio and there wasn’t the quality deal flow we’ve seen in the past. There weren’t that many good companies on the market, but that has pretty much changed since the beginning of this year. We have totally different deal flow and opportunities to grasp.”
Kuentz also sees the M&A market recovering soon, at which point that portfolio work could reap rewards. Part of taking on LPs means Swisscom Ventures has many more stakeholders who expect it to generate returns. That puts pressure on the team to achieve acquisitions for its startups, but Kuentz is keen to do it in a measured way.
“Our focus is very much on having a robust, sustainable portfolio that grows to provide those returns we’ve promised,” he says.
“People are learning you shouldn’t look to sell companies in such an environment, you should just make sure the companies are getting better. Use the time to build the foundations for a successful exit in the future. You should take your time, and that’s what we do.”
