The telecoms sector is the connecting tissue in the process of digitisation various industries are undergoing globally. Developments in telecoms will enable and facilitate the further massification of innovative mobile and internet-related technologies.
Telecoms is arguably one of the most disrupted sectors in terms of its basic services. Telecoms carriers no longer rely on solid revenues from voice or texting services. Over-the-top (OTT) providers of services such as Whatsapp, Skype or Viber seem to have replaced them in the era of internet-connected mobile devices. Thus, partnerships with such OTT disruptors and other businesses operating in the form of mobile apps offer opportunities for revenue growth.
Recent trends in the consumption of mobile internet access have intensified the erosion of profit margins for telecoms, as subscribers tend to use more data, while their monthly bills either stay the same or go down. A report by Deloitte – 2018 Telecommunications Industry Outlook – points out that the industry is searching for new growth opportunities in emerging technologies, noting that it is “critical to identify rapid investment opportunities across the telecoms portfolio – including 5G [fifth generation telecoms], the internet of things and cross-industry partnerships, such as mHealth and mPayments, as well as a host of other growth opportunities”.
One example of the convergence of telecoms with other industries involves Canada-based telecoms provider Telus. Both the corporate and its venturing activities extend into the field of healthcare IT. Richard Osborn, managing director of Telus Ventures, explained: “With a deep commitment to helping improve Canada’s healthcare system, and as the largest health technology vendor in Canada, the division of Telus known as Telus Health has, with the active support of Telus Ventures, acquired, developed and partnered to create a suite of complementary technologies serving healthcare professionals and patients across the country.”
With a decisive role to play in overall technological disruption, the telecoms sector is one of the most competitive industries. To stay competitive, companies – whether new or established – need constantly to make significant outlays of capital. This is why the telecoms business is so capital-intensive, and helped lead to innovative new fundraising methods – Swisscom and Telstra raising third-party capital this summer (see box).
SoftBank, a Japan-based conglomerate and owner of US phone operator Sprint among other mobile and internet assets, had led the way with its own third-party raising of capital for its near-$100bn Vision Fund.
Despite strong competition and mixed economic conditions, the industry is flush with opportunities. An Economist report – Telecoms in 2018 – forecast that this nyear there would be “an average of 113 mobile subscriptions per 100 people in the world’s 60 biggest markets”. According to the report, this growth “will be driven by the increasing uptake of mobile phones and smartphones in Asia, particularly India, and in the emerging markets of sub-Saharan Africa, the fastest-growing region worldwide”.
In developed markets, such as the US, Europe and East Asia, new subscriptions are expected to come from a new and wider range of internet-connected devices and applications within the broader internet-of-things (IoT) space – from connected vehicles through automated workplaces to smart homes.
The part of IoT most ostensibly connected via telecoms today is the connected vehicle space. Deloitte’s report states: “The largest US carriers have made significant investments in the connected car space over the last several years, and we are already seeing strong growth in mobile subscriptions for connected vehicles.” The report also predicts that connected vehicles will “continue to be an important growth area for carriers in 2018”.
There are, however, other areas within IoT that can also create opportunities, such as smart homes, wearables, vehicle fleets, predictive maintenance and automation of manufacturing in different industries. Some of them are likely to generate challenges in educating consumers. In the US alone, for example, fewer than a fifth of consumers claim to feel “very well informed” about cybersecurity risks in connected home applications, according to Deloitte’s 2017 Global Mobile Consumer Survey. Furthermore, according to the same survey, failure to use mobile phone payments is largely due to a perceived fear that they are not secure enough.
The emerging connected world will necessitate higher internet speeds and it is incumbent on the telecoms industry to deliver them. The rollout of 5G mobile networks is a key area of focus in most developed markets. It is, however, as noted above also associated with significant capital outlays. According to Deloitte’s 2018 Telecommunications Industry Outlook, these new mobile networks “will rely on substantial investment in the core fibre backhaul network to support anticipated growth in data services”. While 5G is being tested and prepared for developed markets with a view to full deployment by 2020, telecoms companies are rolling out 4G networks and amplify mobile coverage throughout developing markets.
Beyond IoT and 5G, the telecoms sector can also look for synergies and partnerships with other industries and disruptive technologies related to media consumption over mobile devices. Among the most promising candidates is augmented reality (AR). At the time of writing, US-based telecoms carrier AT&T has partnered US-based AR technology developer Magic Leap. Improvements of AR software and hardware will fuel this trend.
Online media consumed on a subscription basis is a fertile ground for fruitful partnerships. According to Deloitte’s outlook report, 50% of adults in developed markets are expected to be paying for at least two online-only media subscriptions by the end of this year.
Another area of opportunity lies in broadcasting. According to Deloitte’s report, events and live broadcasts are expected to generate revenue of $545bn this year, mostly from traditional sectors and only a small portion from eSports and live streaming. The report also notes that China is the largest market for live streaming, with viewership likely to reach 456 million people.
There are other developments in related technologies that telecoms will be drawn to – from image and speech recognition, to using machine learning to deal with growing mountains of data, to providing high-speed in-flight internet access. The pattern of corporate venturing investments tracked by GCV Analytics confirms this.
The regulatory and political climate for telecoms varies greatly across geographies. There have been both favourable and not-so-favourable developments in key markets. On one hand, certain measures taken by the US administration, such as the tax reduction for US-based businesses and rescinding net neutrality rules – which required internet service providers to offer equal access to all web content – are positive for US-based telecoms. On the other side of the Atlantic, the forced removal of roaming charges across the EU is likely to exert further pressure on already squeezed margins.
For the period between August 2017 and July 2018, we reported 208 venturing rounds involving corporate investors from the telecoms sector. A large number of those (97) took place in the US, while 16 were hosted in China, 13 in India and 10 in Japan.
Many of those commitments (66) went to emerging enterprises in the IT sector – augmented and virtual reality technologies, artificial intelligence, big data and analytics as well as enterprise software – with the remainder going into companies developing other technologies favouring synergies with telecoms – 36 deals in media (games and gaming, digital and online marketing, social media and networks), 21 in transport (connected and autonomous vehicles, ride-hailing apps as well as vehicle marketplaces and platforms) and 19 in services (logistics and supply chain as well as accommodation and travelling), among others.
The network diagram showing co-investments illustrates the wide spectrum of investment interests among the sector’s incumbents. The commitments include smart antennas and telecoms technology developers (Alcan Systems and Matrixx) through cybersecurity applications (Nok Nok Labs and Morphisec), AR and artificial intelligence technologies (Edgybees and Fyusion), media (Fastly), e-commerce platforms and vehicle marketplaces (ShopBack and Carro) and drones (PrecisionHawk).
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds went up significantly from $13.33bn in 2016 to $34.48bn in 2017 – a 160% surge. The deal count also increased 8% from 185 deals in 2016 to 200 in 2017. The 10 largest investments by corporate venturers from the telecoms sector were spread across other industries.
The leading corporate investors from the telecoms sector were SoftBank, Verizon and NTT Docomo. The list of telecoms corporates committing capital in the largest rounds was also topped by SoftBank, along with telecoms firms Telstra, AT&T and Nokia.
The most active corporate venture investors in emerging telecoms companies were mobile semiconductor and chipset manufacturer Qualcomm, along with SoftBank and telecoms provider Swisscom.
The rising telecoms businesses in the portfolios of corporate venturers were varied, encompassing instant visibility solutions (Matrixx), flat smart antennas (Alcan), tools for crowdsourcing wireless networks signal (Open Signal), developers of micro-satellites to provide internet access (OneWeb), cloud-powered wifi systems (Plume Design) and software for online calls and chat (YeeCall Online).
Overall, corporate investments in emerging telecoms-focused enterprises remained stable from 2016 to 2017 in terms of deal volume – 27 and 28 deals respectively, while estimated total investment value dropped from $1.74bn to $1.35bn.
Deals
Telecoms sector corporates invested in large rounds, raised by a range of enterprises, primarily from different sectors, such as services, industrials and IT. None of the top 10 rounds, however, were above the $1bn mark. Most featured SoftBank as an investor, as its investment thesis extends across numerous industries.
US-based AR headset developer Magic Leap raised a $963m series D round, which valued at it $6bn. The round featured media firm Grupo Globo, e-commerce group Alibaba and diversified internet conglomerate Alphabet. Saudi Arabia’s Public Investment Fund committed $400m. The rest was provided by new backers, including media group Axel Springer’s corporate venturing unit, Axel Springer Digital Ventures. Subsequently, it was reported that AT&T had struck a partnership with Magic Leap, which included taking an equity stake in the company, probably as part of this round. However, AT&T’s commitment and stake size were not revealed. Founded in 2011 and operating mostly in stealth mode since then, Magic Leap is developing an AR headset together with a dedicated operating system and is in talks with prospective content producers. It expects to release the headset commercially at a unti price of between $1,500 and $2,000 by the end of this year.
The SoftBank Vision Fund led an $865m series D round for US-based construction services platform Katerra. Other investors included contract manufacturer Foxconn as well as venture firms Greenoaks Capital, DFJ Growth and Khosla Ventures. Founded in 2015, Katerra has built a platform that streamlines the design and building process by operating as an end-to-end system through which it sources and gains materials before construction begins.
China-based robotics technology producer UBtech Robotics raised an $820m series C round, featuring Telstra. The round, which valued UBtech at $5bn, was led by internet company Tencent and included consumer electronics maker Haier Group, furniture rental service Easyhome Furnishings, conglomerate Chia Tai Group, power producer China General Nuclear and online lending platform CreditEase. Founded in 2012, UBtech creates family-friendly humanoid robots for entertainment and educational applications. Its range includes a service robot called Cruzr and a Stormtrooper robot, based on the Star Wars franchise.
SoftBank led a $535m series D round for US-based delivery services provider DoorDash. The company was reportedly valued at $1.4bn post-money. Venture capital firm Sequoia Capital, charitable foundation Wellcome Trust and Singaporean sovereign wealth fund GIC also participated. The individual amounts provided by each investor were not revealed but earlier reports suggested that SoftBank was considering a $300m investment in DoorDash through the SoftBank Vision Fund. DoorDash runs a last-mile delivery service for restaurants and operates across more than 600 cities in the US and Canada.
SoftBank invested about $500m in US-based satellite broadband provider OneWeb, which reportedly intends to launch a series of satellites to provide LTE, 3G and wifi internet coverage to underserved areas. The company aims to start supplying internet to Alaskan users in 2019 and eventually plans to have some 900 satellites in orbit. Previous backers of OneWeb include aerospace group Airbus, conglomerates Virgin Group and Bharti Airtel, satellite service providers Hughes Network Systems and Intelsat, Qualcomm, cable and internet services firm Totalplay as well as beverage producer Coca-Cola.
SoftBank and its Vision Fund were among the investors co-leading a $500m series B round raised by WeWork China, co-working space provider WeWork’s Chinese offshoot. The round reportedly valued the company at $5bn. This latest capital influx will be used to expand its presence in China. Launched in July last year, WeWork China has built a network of 40 locations in three Chinese cities with a total membership of about 20,000, providing working spaces with facilities such as meeting rooms, printers, office supplies and free coffee.
The Vision Fund provided $450m to US-based online real estate transaction platform Compass at a $2.2bn valuation. The transaction took place weeks after the company’s $100m series E round. Founded in 2012, Compass runs a luxury real estate brokerage that spans 30 US cities and uses proprietary technology intended to simplify property buying and selling. It has multiplies the number of its agents by five in the past two years.
India-based online retailer Paytm Mall raised $445m in a funding round led by SoftBank with a $400m commitment. Alibaba supplied an additional $45m for the round, which valued Paytm Mall at approximately $1.9bn. The capital will be supplied across four tranches and will give SoftBank a 21.1% stake, with Alibaba’s stake dropping from 36.3% to just over 30%. Launched by mobile payment platform Paytm in 2016, Paytm Mall has since been restructured into a separate business by One97 Communications, the e-commerce and online services group that owns Paytm. It operates an online marketplace aimed at bricks-and-mortar stores.
US-based dog-walking app provider Wag received $300m from the SoftBank Vision Fund. Wag had initially targeted $100m for its funding round and had already secured a commitment for at least some of that amount from an undisclosed venture capital firm. Founded in 2014, Wag operates a mobile marketplace that enables dog owners to connect with certified dog walkers and dogsitters. Owners can track their pet using GPS, while walkers and sitters can share photographs using the app. The platform is geared toward people with a busy lifestyle and offers both on-demand services and regular appointments.
India-based budget hotel booking platform Oyo Rooms raised $250m in a funding round led by the Vision Fund. Service project management and contract manufacturing company Hero Enterprise also contributed to the round, which reportedly valued Oyo at $850m to $900m. Founded in 2012, Oyo operates an online platform for users to book rooms in budget hotels guaranteeing a certain standard of accommodation. The company currently has a network of 8,500 hotels with 70,000 rooms in 230 cities.
There were other interesting deals in emerging telecoms-focused businesses that received financial backing from corporate investors from other sectors.
Iconectiv, a US-based telephony technology subsidiary of communications equipment manufacturer Ericsson, secured $200m from investment firm Francisco Partners in return for a 16.7% stake. Francisco Partners has transferred the capital to Ericsson as a dividend. The two signed the agreement in March 2017 before closing the deal. Iconectiv’s technology lets clients interconnect networks, add features such as call routing and billing, and allows customers to keep their mobile phone number when switching operators. The platform also offers fraud detection and identity verification technology.
Ireland-based IoT platform developer Cubic Telecom raised $47m in series C funding from investors including Qualcomm, digital technologies provider Valid Soluciones Tecnologicas and carmaker Audi. The round also featured sovereign development fund Ireland Strategic Investment Fund, while Audi invested through its Audi Electronics Venture subsidiary. Founded in 2006, Cubic Telecom produces software that helps IoT and machine-to-machine devices connect to the internet and communicate through data, voice or text. In addition to being investors, Audi and Qualcomm are both customers.
Federated Wireless, a US-based developer of phone spectrum management technology, closed a $42m series B round. Telecoms firm Charter, telecom equipment maker Arris and wireless and broadcast communications infrastructure operator American Tower co-led the round with Singaporean sovereign wealth fund GIC. The round valued Federated Wireless at approximately $122m post-money. Federated Wireless was set up in 2012 by Allied Minds and is working on shared spectrum technology that enables commercial carriers and governments to use the same 3.5GHz telecoms band securely without affecting quality of service. The approach makes it possible for carriers to launch additional services, while enabling new providers to enter the mobile phone market without the need to own a specific frequency band. It can also be used to make existing 4G networks more stable.
Matrixx Software, a US-based developer of software for the telecoms industry, secured $40m in a series C round that included conglomerate CK Hutchison as well as Swisscom and Telstra. Venture capital firm Sutter Hill Ventures led the round, in which Telstra and Swisscom invested through their Telstra Ventures and Swisscom Ventures units. Matrixx has created a digital commerce platform that telecoms operators can use to digitise their business operations, incorporating features such as customer engagement, service delivery, monetisation, the design of products and the management of their lifecycles.
Microsoft Ventures – the corporate venturing subsidiary of software company Microsoft – recently rebranded as M12, participated in a $22.5m series C round for US-based business texting service Zipwhip, whose technology enables users to send text messages from landlines or other non-mobile phone numbers. The company also offers an enterprise-grade cloud-based platform for mobile and landline operators.
Asocs, an Israel-based virtualised communications technology provider backed by IT manufacturer Fujitsu, raised $10m of a $30m funding round. The $10m figure includes commitments from investment firm Taylor Frigon Capital and Fornaciari Trust as well as undisclosed strategic investors. Founded in 2003, Asocs operates edge-based communication systems for wireless networks that offer high security and bandwidth.
Orange Digital Ventures Africa, the initiative launched by the venturing unit of telecoms firm Orange, announced its first investment in a $8.6m round raised by Kenya-based Africa’s Talking. The round was also backed by the International Finance Corporation, an investment unit of the World Bank. Founded in 2010, Africa’s Talking is developing a mobile communication platform intended to build mobile technology systems that are scalable, robust, reliable and cloud-based.
Exits
Corporate venturers from the telecoms sector completed 19 exits between August last year and July this year, including 16 acquisitions and three initial public offerings (IPOs). On a calendar year basis, GCV reported 28 exits in 2017, the same number as 2016. However, the estimated exited capital declined 41% from $6.5bn in 2016 to $3.85bn in 2017.
Big-box retailer Walmart agreed to pay $16bn for a 77% stake in India-based e-commerce marketplace Flipkart, giving several corporates billion-dollar exits. SoftBank’s Vision Fund scored the biggest exit in the deal, taking just over $4bn, having paid $2.5bn for a stake of about 20% in August last year. The purchase was the largest M&A transaction in the venture capital space since Facebook’s $19bn acquisition of WhatsApp in 2014. Founded in 2007 as a book specialist, Flipkart has built a diversified e-commerce platform.
China-based consumer electronics producer Xiaomi raised $4.72bn in an IPO on the Hong Kong Stock Exchange. The company priced roughly 2.18 billion shares at the low end of the HK$17 ($2.17) to HK$22 range previously set. The price valued Xiaomi at about $54bn. Seven cornerstone investors had pledged to buy a combined 10% of the shares, but they reportedly invested $548m in the offering. Cornerstone investors included telecoms company China Mobile, Qualcomm, logistics firm SF Express, state-owned China Merchants Group and investment firm CICFH Entertainment. The IPO was originally intended to be a dual offering that would have raised up to $10bn but Xiaomi was forced to drop the Shanghai portion, reportedly after failing to satisfy Chinese regulators. Founded in 2010, Xiaomi designs and manufactures smartphones as well as other electronic devices such as smart home products, tablets and televisions which are connected through its MIUI operating system.
SoftBank invested $500m in China-based online insurance platform ZhongAn Online Property and Casualty Insurance as part of the latter’s $1.5bn IPO. ZhongAn issued approximately 199 million new shares on the Hong Kong Stock Exchange at HK$59.70 each, at the top of the HK$53.70 to HK$59.70 range it had set. SoftBank acquired a stake of just under 5%. ZhongAn’s online platform provides around 300 specialised insurance packages, its most popular being the option to append insurance to e-commerce purchases to cover the cost of returning goods.
US-based digital signature technology provider DocuSign floated in a $629m IPO in which Alphabet and mass media group Comcast both sold shares. The shares were priced at $29, above the $24 to $26 range the company had set, giving it a market capitalisation of more than $4.4bn. The company issued just over 16 million shares on the Nasdaq Global Select Market, for almost $466m of proceeds, while its existing shareholders sold almost $164m of shares in the offering. Previous backers of DocuSign include a number of corporates, including telecoms firms Deutsche Telekom, NTT Docomo and Telstra. DocuSign has developed an e-signature platform it claims has hundreds of millions of users, including some 370,000 businesses.
Electronics producer Apple acquired Shazam, a UK-based music identification app developer backed by a range of corporate investors, among them wireless telecoms company América Móvil which paid $40m for a 10.8% stake in 2013. Although the size of the deal was not disclosed, it was reported by sources to be about $400m. Shazam has developed an app capable of identifying background music through a mobile device’s microphone.
Online food ordering service Grubhub purchased LevelUp, a US-based mobile payment app developer backed by corporates Deutsche Telekom, Alphabet, JPMorgan Chase and CentroCredit Bank, for $390m. Founded in 2008 as location-based mobile gaming platform Scvngr, LevelUp pivoted to its current business model in 2011 and rebranded in 2012. The company has built a mobile app that enables restaurant custumers to book tables, pre-order food and pay the bill. The restaurants can use the platform to offer loyalty schemes, launch customised marketing campaigns and track sales performance.
Enterprise security software provider Proofpoint agreed to acquire US-based cybersecurity technology developer Cloudmark for $110m, enabling Nokia and trading group Sumitomo to exit. Nokia participated in a $23m round for Cloudmark in 2010 through corporate venturing arm Nokia Growth Partners. Founded in 2001, Cloudmark provides messaging security software to protect communications service provider networks and their subscribers against a range of threats. Upon completion, Proofpoint will integrate Cloudmark’s threat telemetry and intelligence data into its Nexus platform, which powers its product portfolio.
Game developer Nexon paid $80m for a 65.2% stake in Korbit, a South Korea-based cryptocurrency exchange, previously backed by SoftBank through its local corporate venturing unit, SoftBank Ventures Korea. The valuation of Korbit was reported at approximately $120m. Korbit operates an online platform that enables users to trade in cryptocurrencies such as Bitcoin, Ethereum and Ripple. It stores the majority of deposits in digital wallets unconnected to the internet to prevent cyberattacks.
Cloud services provider Akamai Technologies agreed to acquire US-based telecoms software provider Nominum for an undisclosed sum in a deal that will provide an exit for network technology provider Juniper Networks. Founded in 1999, Nominum offers domain name system (DNS) software for telecoms providers focusing on network infrastructure and security. Akamai plans to add the company’s security capabilities to its portfolio of cloud hosting and streaming services.
Lock manufactuer Assa Abloy agreed to acquire US-based smart lock producer August Home for an undisclosed amount, enabling a host of corporates to exit, among which telecoms group SingTel, via its Innov8 unit, alongside telecoms operator KDDI. Other corporate backers included energy supplier AGL, insurance firm Liberty Mutual, and Comcast Ventures and Qualcomm Ventures, respective subsidiaries of Comcast and Qualcomm, as well as SanDisk Ventures and CAA Ventures, the corporate venturing units of data storage provider SanDisk and talent agency CAA. Founded in 2013, August Home provides smart locks that allow users to control access to their homes through their mobile devices.
Global Corporate Venturing reported just three exits from emerging telecoms-related enterprises that involved corporate investors from other sectors.
Casa Systems, a US-based broadband software provider that counts telecoms and cable service provider Liberty Global as an investor, raised $78m in its IPO. The company issued 6 million shares at $13 each on the Nasdaq Global Select Market. It floated below the IPO’s $15 to $17 range, despite the number of shares being cut from 8.4 million. Liberty Global’s corporate venturing unit, Liberty Global Ventures, was an investor in Casa but has not disclosed when it provided funding. Founded in 2013, Casa produces software that helps cable, wireless and wireline broadband suppliers increase their bandwidth and expand the voice, video and data services they offer.
Virtualisation software producer VMWare agreed to acquire VeloCloud Networks, a US-based networking technology provider backed by networking equipment maker Cisco Systems and Telstra for an undisclosed sum. VeloCloud provides cloud-delivered software-defined wide area network technology that enables organisations to build and maintain networks of computers significant distances from each other.
Luma, a US-based wifi hub manufacturer backed by Alphabet and e-commerce firm Amazon, was acquired by consumer group Newell Brands for an undisclosed amount. Founded in 2014, Luma developed a smart home wifi system intended to give better internet reception by using up to three routers to provide a surround effect. The system is compatible with Alexa, Amazon’s voice-operated control system, and Luma added a subscription-based offering called Luma Guardian that includes cybersecurity, a virtual private network option and an enhanced support system.
Funds
Between August 2017 and July 2018, corporate venturers and corporate-backed VC firms investing in the telecoms sector secured over $2.39bn in capital via eight funding initiatives, which included five VC funds, two new venturing units and one accelerator.
On a calendar year basis, funding initiatives decreased considerably from 26 in 2016 to 12 last year. Total estimated capital also went down from $101bn in 2016 – which included the $99.5bn SoftBank Vision Fund – to $2.61bn in 2017, but this was a significant increase over 2015.
Xiaomi announced it would invest $1bn in 100 India-based startups over the next five years. Xiaomi has joined forces with its venture capital affiliate Shunwei Capital as it seeks to build an ecosystem of mobile apps around its smartphones. Its investments will focus on manufacturing, entertainment content, fintech and hyperlocal services such as phone repairs. The corporate, which entered India in 2014, hopes the investments will help create more loyalty among Indian users who, research has indicated, have been driven by a desire to own the most up-to-date popular devices, regardless of brand.
KDDI formed a fund of funds in partnership with venture capital firm Global Brain that plans to invest ¥20bn ($180m) over the next five years. KDDI Open Innovation Fund 3 was established to back VC funds whose investments could achieve synergy with KDDI, as it prepares for the global rollout of 5G. Areas of interest for the fund include IoT and artificial intelligence technology, both of which would benefit from increased mobile speeds. The ¥20bn sum includes ¥5bn under the management of KDDI’s first and second funds.
NTT Group announced it was looking to raise a ¥20bn ($180m) third corporate venturing fund, NTT Investment Partners Fund III, to be managed by NTT Docomo Ventures, the corporate venturing unit operated by NTT Group’s mobile network subsidiary, NTT Docomo. NTT Group and NTT Docomo Ventures will back the fund alongside the corporate’s financial services arm, NTT Finance. Fund III will focus on sectors such as artificial intelligence, robotics and security. The fund will particularly aim to support NTT’s business growth in an area known as business-to-business-to-x, where a provider offers digital services to a wide range of end users including consumers, enterprises, suppliers and partners.
Nokia Growth Partners, the corporate venturing arm of Finland-based Nokia, rebranded to NGP Capital. Formed by Nokia in 2005, NGP focuses on mobility, digital health and connected enterprise technology, and its portfolio currently includes on-demand food provider Deliveroo, Xiaomi and tourism booking platform GetYourGuide. Companies NGP has exited during that time include India-based media company Network18, online classified listings platform Ganji, LED lighting system producer Digital Lumens and mobile advertising technology provider Fyber.
Swisscom Ventures closed a Sfr200m ($199m) fund that included an oversubscribed offering to third-party investors. Swisscom has committed about $50m to the Digital Transformation Fund, with the rest contributed by institutional investors. It will target early to later-stage companies, with half the dealflow expected to come from Switzerland and the rest from the US, Europe and Israel. Swisscom Ventures has already invested about $100m in about 50 startups, resulting in 20 exits.
Sweden-based telecoms and mobile network operator Telia launched its new Telia Ventures corporate venturing unit. Brendan Ives, managing director of Telia’s new business opportunities unit, Telia X, said the decision to form a separate venture unit under Heikki Mäkijärvi (see below) followed the departure of his direct report, Nils Granath, to Swisscanto Invest by Zürcher Kantonalbank.
E-commerce firm Rakuten partnered accelerator operator Techstars to launch an accelerator in Singapore for companies developing social messaging technologies. Rakuten Accelerator, Powered by Techstars, will be particularly interested in companies working with Viber, an instant messaging and voice communication app Rakuten acquired for $900m in 2014. The initiative is open to early-stage startups developing a range of technologies including artificial intelligence, chatbots and chat-based commerce, cryptocurrency, virtual reality and augmented reality, advertising technology, and voice and image recognition. Participating startups will each receive a $120,000 investment.
People
Carlos Domingo, former chief new business and innovation officer for Dubai-based telecoms company Du, has co-founded Spice Venture Capital. Spice has launched an initial coin offering based on the Ethereum blockchain to secure investment funds. The virtual currency model means backers are not limited by fixed terms and can trade their position, with the owner accessing proceeds from exits. Domingo, who left last month to co-found Spice, joined Du in 2015 after a year at telecoms group Telefónica as CEO of new business and innovation.
Heikki Mäkijärvi joined Sweden-based Telia as CEO of its new Telia Ventures corporate venturing unit. Mäkijärvi had spent nearly a year as a partner at Airbus Ventures, the corporate venturing subsidiary of Airbus, but left in mid-2016 to manage a portfolio of advisory and board positions. In addition to the Telia Ventures role, Mäkijärvi also recently joined the board of Finland-headquartered network equipment installer Teleste.
Nils Granath, former head of investments at Telia, became senior investment manager for private equity and venture capital at Swisscanto Invest, an investment unit owned by Switzerland-based Zürcher Kantonalbank. Granath had been responsible for the growth investment portfolio of Division X at Telia for three years. Brendan Ives remains managing director of Division X, while Rebecka Vredin and Johan af Sandeberg are venture investment managers.
Nikesh Arora, who left SoftBank where he spearheaded its corporate venturing strategy as company president and chief operating officer in 2016, became CEO and chairman of cybersecurity company Palo Alto Networks. Arora replaced long-time executive Mark McLaughlin, who becomes vice-chairman of Palo Alto Networks. Arora joined SoftBank in late 2014 from Google where he was chief business officer, and directed SoftBank to lean more towards larger investments, notably in his home country of India.
In the meantime, SoftBank promoted both chief operating officer Marcelo Claure and SoftBank Vision Fund head Rajeev Misra to executive vice-president. It added at least 10 executives to SoftBank Investment Advisors, which manages the Vision Fund, including Paul Davison, who was an associate at investment bank Rothschild & Co before moving to SoftBank. In addition, Lucio Di Ciaccio joined SoftBank from private equity firm Carlyle Group, where he was part of the special situations team. Both Davison and Di Ciaccio have joined SoftBank’s London office, where Misra is also based.
The remaining eight executives have joined the fund’s office in San Carlos in California. They include Justin Nam, former associate at private equity firm Gryphon Investors, and Denton Xu, former associate at private equity firm Francisco Partners. The identity of the others was not revealed.
SoftBank Ventures Korea appointed managing director Joon-pyo Lee as chief executive. Lee replaces Gyu-hak Moon, who has moved to the Vision Fund. Lee had joined SoftBank Ventures in 2015 and led investments in portfolio companies including MyMusicTaste, Balance Hero, Lunit and TwoXAR.
Andrew Kovacs left venture capital firm Sequoia Capital to become global head of communications at the Vision Fund. Sequoia appointed Kovacs in 2012 to be its first communications and policy lead, assigning him responsibilities that included marketing services for the firm’s portfolio companies. Kovacs previously spent five years working communications and public affairs as a senior manager at internet technology provider Google, now part of the Alphabet holding company.
Ramzi Ramsey joined the Vision Fund as an investment director. SoftBank hired Ramsey from growth equity firm Technology Crossover Ventures (TCV), where he was a vice-president, having joined in 2014. He was a co-founder of children’s Arabic book retailer Araboh in 2010. During his stint at TCV, Ramsey was a board observer at Avvo, the legal marketplace acquired by Internet Brands, event ticketing sales platform SeatGeek and online tutoring service Varsity Tutors.
Laurel Buckner, formerly vice-president of corporate venture investments and mergers and acquisitions at US-based telecoms operator GCI Communications, was hired by peer ATN International. As senior vice-president at ATN, Buckner will be managing director of its new corporate venturing unit, ATN Ventures. ATN operates telecoms services in remote areas of the US and Caribbean as well as solar energy units for municipalities in the US and India. Buckner said ATN Ventures would be looking for deals in these areas, particularly around software and renewable energy storage. Buckner previously set up the corporate venture department group at GCI, Alaska’s largest telecoms provider, at the beginning of 2014.
Frédéric Rombaut, formerly managing director of corporate venturing funds for Cisco and Qualcomm, joined UK-based venture capital firm Seraphim Capital as general partner. Seraphim has raised a $95m fund focused on the $350bn space technology market, and plans to launch accelerator Seraphim Space Camp and a new fund with a wider global scope. Investors include corporates SES, Airbus and Telespazio. Before joining Cisco in January 2012, Rombaut was managing director of Qualcomm’s European investment unit, Qualcomm Ventures Europe, for six years.
Philippe Dewost, former head of the digital economy section of the investments of the future program at state-owned Groupe Caisse des Dépôts, was appointed director of Leonard, France-based construction company Vinci’s innovation and foresight platform. Dewost is a co-founder of internet service provider Wanadoo and has also been CEO of ImSense, a UK-based startup was acquired by Apple in 2010.
Asif Giga left Experian Ventures, the strategic investment arm of credit information bureau Experian, to become an investment director at Ericsson’s corporate venturing unit, Ericsson Ventures. Giga had been with Experian for about a year, assisting with its initial corporate venturing operations in financial technology-related areas such as security, data and analytics. Giga had worked as a venture investor at Singtel Innov8. He supported or led diligence on six investments during his time there.
Telstra reorients financially while Swisscom raises a new fund
Telstra Ventures, the corporate venturing arm of Australia-based telecoms firm Telstra, channelled its activities into a partnership with private equity firm HarbourVest. The total size of the vehicle will be A$675m (about $500m).
HarbourVest reportedly agreed to pay for $62.5m for a 25% stake in the vehicle. It was later reported that both Telstra and HarbourVest had each invested a further $92m in the fund, leaving Telstra with a 62.5% stake and HarbourVest with 32.5%. The fund will take over management of Telstra Ventures’ portfolio but it is not clear whether the fund will retain the Telstra Ventures name, offices or management.
Founded in 2011, Telstra Ventures runs offices in Australia, the US and China and targets deals in sectors such as mobile internet, media, cloud computing, machine learning and cybersecurity.
Swisscom Ventures, the corporate venturing subsidiary of telecoms provider Swisscom, closed a Sfr200m ($200m) fund that included an oversubscribed offering to third-party investors. Swisscom committed about $50m to the Digital Transformation Fund, with the rest committed by institutional investors. The fund will target early to later-stage companies, with half the dealflow expected to come from Switzerland and the rest from the US, Europe and Israel.
Swisscom Ventures has gone through a number of iterations, ending up with an early-stage fund that runs on an evergreen model where returns are reinvested in new portfolio companies. However, unlike its Australian peer, Swisscom Ventures will remain with its parent company maintaining a focus on both strategic and financial goals.
Alternative models to leverage corporate cash along with traditional VC and private equity investors are emerging, but the viability of corporate venturing for telecoms players has also proven its effectiveness and attractiveness when it comes raising funds.
University and government backing for telecoms businesses
Over the past few years, there have been few commitments to university spinouts in the telecoms sector reported by our sister publication, Global University Venturing – one in 2016 and three in 2017. The level of estimated total capital deployed in those rounds was also correspondingly modest.
A good example of such a round was the $7m series A raised by GenXComm, a US-based communications technology spinout from University of Texas (UT) at Austin.
The transaction featured the university system’s investment arm UT Horizon Fund. Intel Capital, the corporate venturing division of semiconductor producer Intel, led the round, which included WS Investment, the corporate venture capital fund of law firm Wilson Sonsini Goodrich & Rosati.
Founded in 2016, GenXComm has developed simultaneous self-interference cancellation technology, which can double the efficiency of the available wireless spectrum and boost network performance up to 30-fold in dense environments. The technology has applications for a range of telecoms services, including wifi, 5G, the internet of things and broadband services over existing cable TV infrastructure.
Government investments in telecoms enterprises, reported by our other publication Global Government Venturing, were also scarce in number and value – five worth an estimated $224m last year, down from the $813m in the six rounds tracked in 2016.
A good example of a government-backed round raised by a telecoms business was Community Fibre. The company, which installs internet connections in social housing in London, raised £25m ($32m) in a new funding round. The deal was supported by the UK government’s new National Digital Infrastructure Fund as well as the railways pension fund Railpen.
Founded in 2010, Community Fibre provides broadband internet services throughout the UK.
