Telecoms connect our digitised world. Developments in this sector facilitate the increasing digitisation of the globe and the proliferation of innovative mobile-connected technologies. With its decisive role to play in overall technological disruption, the telecoms sector is, naturally, one of the most competitive industries. To stay relevant, companies continually make significant outlays of capital and innovate, so the telecoms business is capital-intensive.
Characterised by high competition and high capital requirements, the sector is arguably among the most disrupted. The basic services carriers once provided – such as voice or texting – have been long replaced by over-the-top (OTT) providers of services like WhatsApp, Skype or Viber that operate via the internet. This has had an impact on telecoms’ revenue streams and the trend is likely to deepen with the rollout of 5G and the range of connected technologies it may fuel.
This capital intensity partly helps explain why telecom corporate venturing units have looked to third parties to help fund their deals. From SoftBank with its huge Vision Funds I and II, to Swisscom, Telstra and Deutsche Telekom, the sector has developed structures and strategies in the past three years to add third-party limited partners in funds.
Demand for capital is one thing, but getting a supply is another, which needs investors to see the potential for financial returns.
Matthew Koertge, managing partner at Telstra Ventures, which took on HarbourVest as a secondary investor last summer, said: “Things are going very well. A recent highlight was the Crowdstrike IPO which has been an excellent outcome for us. Also, the NGINX acquisition by F5 Networks for $670m was a great recent result [and last month Temenos agreed to acquire Kony].”
As the introduction of 5G wireless technology in 2020 approaches, established companies in the industry appear optimistic about opportunities. According to data consultancy firm Deloitte, 72 operators are testing 5G offerings and 25 wireless operators are expected to launch services by the end of 2019. Roughly five million 5G modems are also forecast to be sold in 2019, with the figures for 2020 much higher.
As 5G takes over developed markets, carriers are expected to roll out and scale 3G and 4G connectivity in developing ones, where the subscription base is fairly mature. The Economist’s data found in sub-Saharan Africa there is an average of 104 mobile service subscriptions per 100 people, comparable to Latin (107) and North America (109).
According to a Deloitte report ‘2019 Telecommunications Industry Outlook’, there is much to be done, as consumers display an insatiable appetite for mobile data. The report cites findings from the US, where 37% of respondents have unlimited data plans, a rise from 25% in 2017.
As providers offer lower prices for such plans and other services, there is a decrease in the average revenue per user (ARPU), which in turn compels providers to look for new opportunities. The report points out that such opportunities may came from “consolidations and partnerships, especially in the areas of cable and content”. Data from Deloitte’s latest Digital Media Trends survey show that 55% of US households subscribe to paid video streaming services, while pay-TV penetration has registered a significant decline from 75% down to 63%.
How can 5G opportunities mitigate this erosion of profits for telecoms? The key to 5G’s potential is its higher speed. The last major network upgrade, 4G, took place in 2009 when our devices reached a peak speed of nearly 10 Mbps. This pales in comparison with what 5G is set to deliver – speeds of between 10 and 20 Gbps. This would drive network latency from 30ms to about 1ms, making it appropriate for a wide range of services and devices that require ultra-low latency.
The upgrade is expected to generate opportunities that would enable incumbents to gain revenue in the fixed broadband business-to-consumer and the business-to-business markets, involving rising technologies like the internet of things (IoT), smart cities and connected vehicles. The Deloitte report notes providers will have “to employ ‘network slicing’ to customise their offerings. In the context of 5G, this will enable sharing of a given physical network to run IoT, mobile broadband and very low-latency applications – including many connected-car and connected-home functions that have the potential to create entirely new revenue sources for providers in 2019.”
The report also points out key revenue-generating opportunities await in mobile payments and mobile health: “In the area of mHealth, operators can monetise services targeted to the growing number of subscribers who have adopted healthcare-centric wearables to, for example, help them ensure they are taking the proper dosages of medications. In the world of mPayments, on the other hand, mobile operators can play a different role: as an integrator for devices, applications, methods of mobile payment, and customer identity management.” According to some estimates, telecom providers can increase their mobile payments revenues “at least fourfold by 2022”. We have seen minority stake investments by telecoms in emerging businesses in mHealth and mPayments and those are expected to continue before the rollout of 5G and even after.
Another technology which is poised to create opportunities for telecoms in the business-to-consumer segment is augmented and virtual reality (AR & VR). 5G connectivity will allow them to unleash their full potential, as their technology and content need extensive bandwidth and low latency. The range of opportunities for telecom providers and customers span from autonomous vehicles, virtual training and innovative edtech applications to remote healthcare and virtual reality experiences by e-commerce retailers. We are likely to continue to see interest in these technologies by telecom corporates on the venture front.
The 2019 Deloitte report also mentions the potential of blockchain technology for telecoms thanks to its potential to ensure secure connectivity and streamlining costs: “Telecoms can harness blockchain technology to simplify billing systems, cut down revenue leakage from roaming and identity fraud, and automate settlements with smart contracts and tokens. The technology also offers several other advantages that can benefit 5G networks, including the enablement of secure, error-free, peer-to-peer connectivity for thousands of IoT devices with cost-efficient self-managed networks.” The report also notes that telecom incumbents can “accelerate their progress toward 5G by using blockchain to autonomously monitor and regulate their networks”.
Agustín Moro, head of partnerships at Spain-based phone operator Telefónica, in a speech at the Innova Summit in Chile, said blockchain and edge computing were two technologies of the future.
There are also other technologies that will naturally draw the attention of telecoms – from image and speech recognition to machine learning to providing high-speed in-flight internet access. The pattern of corporate venturing investments GCV Analytics has tracked corroborates this.
Politics and regulation
The political and regulatory climate for telecoms varies greatly from region to region. There have been both favourable and not so favourable developments in key markets in recent years. In the US, the tax reduction for US-based businesses by and rescinding net neutrality have been undoubtedly positive for US-based telecoms, although by the time of writing two states (California and Washington) had already passed laws challenging the 2017 repeal of net neutrality.
In Europe, the obligatory removal of roaming charges across member states of the EU has exerted pressure on the already squeezed margins of telecom carriers. Finally, the allegations of security and espionage threats have led to the ban of devices and network equipment from China-based electronics manufacturer Huawei, the arrest of the company’s CFO in Canada and the unprecedented revocation of its Android licence.
For the period between August 2018 and July 2019, we reported 220 venturing rounds involving corporate investors from the telecoms sector. Many of them (85) took place in the US, while 27 were hosted in Japan, 18 in China, 14 in India.
The majority of those commitments (64) went to emerging enterprises from the IT sector (mostly cybersecurity, artificial intelligence, big data, semiconductors and chips) as well as into companies developing other technologies in synergies with telecoms: 24 deals in the services sector (mostly accommodation and travel, real estate tech, logistics and edtech), 26 in the financial sector (mostly payment technology), and 20 in the consumer sector (mostly e-commerce platforms and related businesses).
The network diagram of co-investments of telecoms corporates, shows the broad variety of investment interests of the sector’s incumbents. The commitments range from smart grid tech (Actility) and drone platforms (Precision Hawk) through cybersecurity (CounterTack), connected vehicle platforms (Mojio), holography (Ligh Field Lab) and augmented reality tech developers (MagicLeap) to e-commerce platforms (ShopBack), cryptocurrency exchanges (De Current) and insurance benefits management software (CXA Group).
Capital raised in corporate-backed rounds rose from $34.55bn in 2017 to $35.61bn in 2018, representing a 3% increase. The deal count remained at roughly the same level, with 203 deals in 2017 compared to the 200 tracked by the end of 2018.
The 10 largest investments by corporate venturers from the telecoms sector were all made by SoftBank, across a diverse range of sectors.
The leading corporate investors from the telecoms sector in terms of largest number of deals were SoftBank and telecoms firms KDDI and NTT Docomo. The list of telecoms corporates committing capital in the largest rounds was headed also by SoftBank with telecoms equipment manufacturer China Electronics and NTT Docomo.
The most active corporate venture investors in the emerging telecoms businesses were semiconductor producer Qualcomm, networking equipment maker Cisco Systems and e-commerce firm Rakuten.
The emerging telecoms businesses in the portfolios of corporate venturers came from wireless sensors, charging and chipset technologies (Filament, Chargifi, Celeno), IoT networks (SigFox, PubNub), solutions for cloud services (Cenx, VeloCloud), online map tech (OpenSignal), full-duplex radio signalling technology (Kumu) as well as a low-orbit satellite networks for internet coverage (OneWeb).
Overall, corporate investments in emerging telecoms-focused enterprises went down from 28 rounds in 2017 to 17 by the end of 2018, a 40% decrease. The estimated total dollars in those rounds dropped even more significantly, by 65%, from $1.35bn in 2017 to $802m last year. However, by the end of July this year we had already tracked 19 rounds, worth an estimated total of $1.83bn, suggesting valuations are on the rise at the moment.
Deals
Corporates from the telecoms sector invested in large multimillion-dollar rounds, raised by enterprises from the consumer, media, transport, services and other sectors. All of the top 10 deals were above the $1bn mark and featured SoftBank as an investor.
The largest was Ele.me and Koubei, the merged local services subsidiaries of e-commerce group Alibaba, which raised $4bn at a $30bn valuation. SoftBank provided its share of the funding through the Vision Fund, joining Alibaba and its financial services affiliate Ant Financial as well as private equity group Primavera Capital. The capital was provided to support the merger of Ele.me, a portfolio company Alibaba fully acquired in 2018 at a $9.5bn valuation, and Koubei, a spinoff that secured $1.1bn 2017 at an $8.8bn valuation. The merged company will provide mobile users with access to a wide range of local services including retail, food delivery, travel and accommodation. Food delivery and restaurant listings specialist Ele.me served more than 167 million users in the year ending in June, and the companies jointly linked to more than 3.5 million merchants over the same period.
The second largest telecoms corporate transaction was China-based digital media company Bytedance’s $3bn from investors including the Japanese mobile group, reportedly at a $75bn valuation. Growth equity firm General Atlantic and investment firms KKR and Primavera Capital Group also took part. Bytedance’s best known property is news aggregation app Toutiao, which had 120 million daily active users at the start of 2018, but also runs shot-form video platform TikTok, which boasts more than 500 million monthly active users and the photo modification app Faceu. The company has also launched additional products, such as budget e-commerce platform Zhidian and social commerce app Xincao. It will put the funding toward expanding its offering and growing both domestically and internationally.
The Vision Fund invested $3bn in one of its biggest portfolio companies, US-based workspace provider WeWork, recently rebranded as the We Company. The financing was supplied in the form of warrants that gave the fund the opportunity to buy WeWork stock at $110 a share or higher by September this year. Founded in 2010, WeWork oversees a network of flexible workspaces in more than 30 countries across five continents which are leased from landlords and rented out to businesses or individuals by the desk or office. It is also branching out into managing housing, leisure and educational spaces.
At the beginning of this year, SoftBank invested another $2bn in The We Company, reportedly at a $47bn valuation, but funding came from SoftBank itself, not the Vision Fund.
SoftBank also invested $2bn in South Korea-based e-commerce platform Coupang through its Vision Fund, reportedly at a valuation of $9bn. The company operates an online marketplace that lists more than 120 million products for sale, 4 million of which are available for one-day delivery through Rocket, its end-to-end fulfilment system. The funding will support a strengthening of the platform’s technology capabilities, as it looks to cut delivery times while introducing features such as an AI-equipped product recommendation system and a one-touch payment option.
Automotive e-commerce platform Chehaoduo, based in China, secured a $1.5bn investment from the Vision Fund for technology, product and services development. It also plans to increase its marketing activities and bolster its offline presence. The spinout of classified marketplace Ganji, operates a used vehicle auction and trading platform known as Guazi and an after-sales services subsidiary, Maodou.
US-based satellite services provider OneWeb secured $1.25bn in funding from investors that included SoftBank, diversified conglomerate Grupo Salinas and Qualcomm. The corporates were joined by the government of Rwanda and the round increased the total raised by the company to about $3.4bn since it was founded in 2012. It is building a network of low earth-orbit satellites that are intended to provide high-speed internet connectivity to rural areas and other under-served parts of the world. The satellites are built through a partnership with another investor, aerospace manufacturer Airbus. The latest funding follows the recent launch of OneWeb’s first six satellites and it will be used to accelerate production and increase its launches to 30 a month by the end of 2019.
An autonomous driving software developer Cruise Automation, based in the US, secured $1.15bn in funding from investors including General Motors (GM) that spun off the company in 2018. Fellow carmaker Honda and the Vision Fund also participated in the round, which also featured investment manager T Rowe Price Associates. The developer was valued at $19bn post-money. Cruise is working on software that will enable driverless cars to process data from their sensors and adapt accordingly, particularly in electric vehicles such as GM’s Chevrolet Bolt hatchback. The automotive manufacturer acquired Cruise for $1bn in 2016, three years after it was founded.
SoftBank’s Vision Fund provided $1.1bn of funding for US-based smart glass producer View, increasing its overall debt and equity financing to more than $1.8bn. The cash will support an increase in manufacturing capabilities as well as research and development. View has created a type of glass dubbed Dynamic Glass which automatically tints according to the amount of direct light coming in, helping to decrease heating and lighting costs. It has been installed in 35 million square feet of buildings.
Indonesia-based online marketplace Tokopedia raised $1.1bn in a funding round co-led by Alibaba and the SoftBank’s Vision Fund. A direct subsidiary, Softbank Ventures Korea, also participated in the round along with undisclosed existing investors. It reportedly valued the company at about $7bn. Tokopedia runs an e-commerce platform with more than 100 million products listed. The company is in the process of introducing same-day delivery for an increasing amount of goods.
Inbound investment
There were other interesting deals in emerging telecoms-focused businesses that received financial backing from corporate investors from outside their own sector.
US-based telematics technology provider Cambridge Mobile Telematics (CMT) secured $500m in an investment by the Vision Fund. CMT has built a telematics system that utilises mobile sensing, artificial intelligence and behavioural analytics technology to measure driving performance to help improve driving standards and monitor safety. The Drivewell mobile telematics platform created by the company includes dashcam video analytics, incentives and advice that can help drivers improve, and can potentially reduce accidents caused by hard braking, speeding or phone distraction. Users include several large insurance companies, and it is capable of automating parts of the claims process.
Loon, a subsidiary of technology conglomerate Alphabet that uses balloons to connect users in remote places to the internet, secured $125m from HapsMobile, a high-altitude telecoms infrastructure developer. The investment forms the basis of a collaboration agreement that also gives Loon the right to invest $125m in HapsMobile, a joint venture formed by SoftBank and unmanned aerial vehicle developer Aerovironment. The balloons float at an altitude of almost 18 kilometres and generate wireless networks boasting speeds of up to 4G.
US-based virtual radio access network technology provider Altiostar Networks officially completed a $114m series C round, which featured e-commerce firm Rakuten. The initially raised $32m from Tech Mahindra and Qualcomm Ventures, respective subsidiaries of conglomerate Mahindra and Mahindra and Qualcomm. The money will help the company expand the 4G and 5G capabilities of its software-defined infrastructure. Rakuten has secured a licence from the Japanese government to set up a mobile network and Altiostar has agreed to deploy its technology in the network and co-develop 5G products. Founded in 2011 as Radio Mobile Access, Altiostar produces virtual radio access network technology that allows telecoms firms to deploy outdoor and indoor mobile phone networks, with operators managing interference and scaling coverage through a software interface.
Broadband technology developer Tarana Wireless, based in the US, completed a $88m round that included satellite technology and services provider EchoStar, after raising $60m in an extension to the original round. EchoStar and venture capital firm Khosla Ventures supplied the new funding. The first tranche of $28m was led by 1010 Holdings, which functions as the family office of entrepreneur Greg Wyler. Founded in 2009, Tarana has developed a fixed wireless broadband system known as G1 which avoids obstructions, interference and weather conditions by adjusting itself thousands of times per second.
Communications technology developer Agora, also based in the US, raised $70m in a series C round backed by quantitative trading and technology firm Susquehanna International Group (SIG). The round was led by hedge fund Coatue Management and included investment group Morningside and venture capital firm Shunwei Capital. Founded in 2014, Agora provides a software development kit (SDK) that enables developers to more easily integrate audio and video communications as well as livestreaming functionality into their software and games. The SDK relies on Agora’s cloud-based platform, removing the need for developers to build their own infrastructure. The company claims it has clocked more than 2 billion installations of its SDK to date.
US-based business texting service Zipwhip raised $51.5m in a series D round featuring M12, the corporate venturing division of software provider Microsoft. Investment bank Goldman Sachs led the round through its private capital investing group, while OpenView and Voyager Capital also participated. Founded in 2007, Zipwhip has developed a platform that enables businesses to send text messages to their customers through existing landlines, internet protocols or toll-free phone numbers. The company has attracted more than 100 enterprise clients to date and supported 3.3 million business phone numbers. The series D round will support the development of new software and expansion of its application programming interface capabilities.
Diversified conglomerate Mitsui co-led a $40m series B round for Singapore-based internet connectivity and cloud services provider Campana Group. Founded in 2014, Campana oversees an extensive fibre optic cable network that connects clients to the internet and enables its business customers to run virtual private networks. The company is responsible for more than 4,000 km of fibre optic cable and provides cloud and data centre services. It will put the series B funding toward Sigmar, a submarine cable between Burma and Singapore.
US-based mobile networking service Affirmed Networks received $38m in a funding round that included Qualcomm Ventures. The round was led by investment firm Centerview Capital Technology and included Eastward Capital Partners and unnamed existing shareholders. Affirmed has created virtualised and cloud-native network software that helps mobile network operators manage, monetise and deploy 3G, 4G, 5G and wifi mobile services. The company plans to use the capital to invest in product development, expand its customer base and create 5G services.
Property developer Greenland Holdings invested RMB200m ($29.1m) in China-based broadband technology provider Baicells Technologies. Internet provider Century Internet, Synergy Capital and private investor Lei Jun are also among Baicells’ shareholders, though the company did not disclose details of its earlier funding. Baicells is developing long-term evolution (LTE) technology that assists customers such as mobile operators, broadband access operators, cable operators and enterprise private network providers in establishing 5G wireless broadband networks.
Exits
Corporate venturers from the telecoms sector completed 32 exits between August 2018 and July 2019 – 21 acquisitions, nine initial public offerings (IPOs), two mergers and one other transaction.
Uber, the US-based on-demand ride service backed by a range of corporate investors including SoftBank, raised $8.1bn when it floated on the New York Stock Exchange. The company priced 180 million shares at $45 each, near the foot of the $44 to $50 range it had set earlier. It was the largest public offering since Alibaba raised $25bn in 2014 and valued the company at $82.4bn. Digital payment services firm PayPal bought an additional $500m of shares through a private placement. Uber’s other previous corporate backers include carmaker Toyota, its China-based peer Didi Chuxing, software provider Microsoft, internet company Baidu, media groups Axel Springer and Bennett Coleman, as well as GV, a corporate venturing subsidiary of internet conglomerate Alphabet. Founded in 2009, Uber operates a ride hailing platform with 91 million monthly active users that ties into adjacent services such as food and freight delivery. It recently span off its autonomous driving subsidiary, Uber ATG, with $1bn of external funding.
The ride-hailing app agreed to acquire United Arab Emirates-based ride hailing service Careem for $3.1bn, providing exits for various corporates, including telecoms firm Saudi Telecom, e-commerce firm Rakuten, travel agency Al Tayyar, automaker Daimler and Didi Chuxing. The deal consists of $1.4bn in cash and $1.7bn in convertible notes, which will be convertible to Uber stock at a price of $55 per share. Careem’s on-demand ride service covers more than 100 cities in the Middle East, Africa, Turkey and Pakistan in addition to a digital payment business, Careem Pay, and a last-mile delivery service called Careem Now.
Application services provider F5 agreed to acquire US-based app development technology producer Nginx for approximately $670m in a deal, allowing telecoms firm Telstra to exit. Nginx was founded in 2011 to market the open-source web server and application delivery software of the same name. The company offers a premium version helping enterprises deliver content rapidly and securely. The software is used in some 375 million websites, often for load balancing. The company’s brand will continue to exist independently post-acquisition, but its product will be strengthened by F5’s security and cloud technology.
CrowdStrike, the US-based endpoint protection software provider backed by internet and technology conglomerate Alphabet, cloud services provider RackSpace and Telstra, raised $612m in its IPO. The company issued 18 million shares on the Nasdaq Global Select Market priced at $34 each, higher than the $28 to $33 range it had set. Those terms had been increased from a $19 to $23 range it had originally determined and valued the company at approximately $6.82bn when it floated. Founded in 2011, CrowdStrike has built an AI-equipped, cloud-based cybersecurity platform that detects and prevents cyberattacks at the endpoint.
IT networking technology provider Juniper Networks agreed to acquire Mist Systems, a US-based developer of AI-equipped wireless networks, for $405m. Alphabet, Cisco Systems and NTT exited. Juniper is acquiring the company to expand its capabilities in the cloud-managed wireless networking space. Founded in 2014, Mist has created a wireless platform that uses AI to make wifi more reliable and predictable. It also features an AI assistant called Marvis that can help with troubleshooting while supplying precise data on how the network is operating and how clients are acting.
Germany-based industrial IoT technology provider Relayr was acquired by Hartford Steam Boiler (HSB), the equipment breakdown insurance subsidiary of reinsurance firm Munich Re, for $300m. Founded in 2013, Relayr has created a middleware software platform that relies on AI to offer data insights into new and legacy hardware. The technology makes it possible, for example, to predict when a machine is about to fail. The company will continue to operate independently but be able to tap into Munich Re’s financial and engineering resources and client base.
Car-sharing service provider Getaround acquired France-based car rental marketplace Drivy in a $300m transaction that allowed car repair services provider Mobivia NGP Capital, the VC firm spun off by communications technology producer Nokia, to exit. Founded in 2010, Drivy runs a peer-to-peer car rental platform with roughly 2.5 million users across France, Germany, Spain, Austria, Belgium and the UK which enables users to book a vehicle on the platform and unlock it with a smartphone app. The merged company will have more than 5 million users across 140 US cities and 170 cities in Europe.
The RealReal, a US-based second-hand luxury items reseller backed by telecoms firm Novel Group, raised $300m in its IPO, issuing 15 million shares priced at $20 each. The company had targeted a range of $17 to $19 for its shares. The offering valued it at about $1.65bn. Founded in 2011, The RealReal operates an e-commerce platform where users can sell and buy pre-owned luxury consumer goods such as handbags, art and furniture. The company employs more than 100 art curators and other experts who verify each item before it is listed on the platform. It also maintains three brick-and-mortar locations in New York and Los Angeles.
Guardant Health, a US-based cancer diagnostics technology developer that has SoftBank as its largest shareholder, went public in an IPO sized at approximately $238m. The company issued 12.5 million shares on the Nasdaq Global Select Market priced at $19 each, above the IPO’s $15 to $17 range, giving it a market capitalisation of about $1.58bn. Guardant has created liquid biopsy-based blood tests that detect advanced cancer with assistance from large datasets and data analytics, and which are intended to be cheaper and less invasive than tissue biopsies.
Broadband communications and video services provider Altice USA acquired one of its portfolio companies, US-based entertainment network Cheddar, for $200m. Cheddar operates an online television network of two channels: Cheddar Business, which focuses on technology and the innovation ecosystem, and Cheddar News, which broadcasts general news stories. The network is accessible through online streaming platforms such as DirecTV Now, Hulu and Facebook, and through more than half of smart televisions in the US. The company also operates CheddarU, a network of 1,600 television screens in gyms, cafeterias and student unions of 600 university campuses. Its subsidiaries include RateMyProfessors, where students can review their lecturers.
Global Corporate Venturing reported only one exit from emerging telecoms-related enterprises that involved a corporate investor.
Software virtualisation company VMware announced its intention to buy Uhana, a US-based network automation software provider backed by Telstra Ventures, for an undisclosed amount. Spun out of Stanford University, Uhana has developed cloud-based software that enables operators to predict anomalies in network operations and applications by leveraging AI and machine learning technology. VMware said it will add the technology to its telecoms cloud and edge cloud product portfolio to help operators cope with 5G networks and low latency applications that require large amounts of data to be processed in real time, such as cloud gaming, virtual reality, augmented reality and IoT systems.
Funds
For the period between August 2018 and July 2019, corporate venturers and funds investing in the telecoms sector secured over $110.81bn in capital via 14 funding initiatives, which included nine VC funds, three new CVC subsidiaries, one accelerator and one incubator initiatives. The second SoftBank Vision Fund, sized at $108bn of capital, accounts for most of the estimated total.
On a calendar year-to-year basis, the number of funding initiatives in the telecoms sector went down to seven in 2018, versus the 12 registered in 2017, and also significantly down from the peaks of 24 to 27 reported in 2014-16. The total estimated capital decreased from $2.62bn in 2017 to $906m but increased hugely in 2019 because of the effect of the unusually large second Vision Fund in 2019.
SoftBank launched its second Vision Fund, disclosing it has signed memoranda of understanding (MOUs) for funding that will take its size to $108bn. SoftBank launched its first Vision Fund in 2017 with a $100bn target and has confirmed $98.6bn of debt and equity financing for the vehicle, with much of the capital coming from Middle Eastern sovereign wealth funds and corporate partners. The plans to contribute $38bn of the capital for the new fund, up from about $33bn for the original Vision Fund. Consumer electronics producer Apple and manufacturing services firm Foxconn each provided $1bn for the first fund and have signed MOUs to invest in this one, but corporates Qualcomm and Sharp do not appear to be returning. Software provider Microsoft, insurance firm Dai-ichi Life, financial services firms Mizuho Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Trust Bank and Standard Chartered are also among the LPs. Other investors are brokerage group Daiwa Securities, the state-owned National Investment Corporation of National Bank of Kazakhstan and unnamed “major participants” from Taiwan.
South Korea-based financial services firm Hana Financial Group set up a ₩1 trillion ($894m) fund-of-funds that will provide debt financing to venture capital firms. Hana Ventures, headquartered in Seoul, plans to deploy the capital by 2021, targeting VC firms investing in biotech and information, communication and technology (ICT) product developers. The company has also put up 100bn won for a fourth Industrial Revolution fund. In addition to supplying loans, Hana is also seeking to make direct investments in investment vehicles. Despite its focus on a fund-of-funds structure, Hana Financial is the first notable financial services firm in Korea to publicly set up a dedicated corporate venturing vehicle.
China-based venture capital firm Fortune Venture Capital secured RMB4.63bn ($667m) for its latest yuan-denominated fund, from limited partners including property developer Century Golden Resources Group. Financial services firm Industrial and Commercial Bank was also among the LPs, as were Shenzhen Yunneng Fund, Kpeng Capital and the city of Shenzhen’s guidance fund. Founded in 2000, Fortune VC focuses on media and telecoms, consumer goods and services, agricultural technology and the cleantech space. Its portfolio includes electronics recycling service Aihuishou and browser developer Red Core Security.
NTT raised $500m for its US-based corporate venturing fund, according to a regulatory filing. The fund, NTT Venture Capital, will be headed by Vab Goel. Goel’s speciality areas include mobile, cloud, networking, security and internet technology. His investments at Norwest, which he joined in 2000, include cloud networking and security software provider Virtela, which was acquired by his new firm for $525m in 2013. The fund will focus on global innovation and digital technology. Its capital was supplied by two partners, according to the filing. NTT already makes investments through NTT Docomo Ventures, which operates as a subsidiary of its mobile division, NTT Docomo, and has formed three separate funds under the NTT Investment Partners banner which were equipped with a total of ¥45bn ($400m). NTT Docomo Ventures is based in Japan but opened an office in Silicon Valley in 2017 and manages a $100m US fund called Docomo Capital that is overseen by managing director Neil Sadaranganey.
DTCP, the investment arm of Germany-based telecoms firm Deutsche Telekom formerly known as Deutsche Telekom Capital Partners, secured external investors for a $350m fund. The corporate launched the first fund in 2014 as a successor to T-Venture, its corporate venture capital arm since 1998, supplying $140m to take the total provided by Deutsche Telekom across various funds to $620m at the time. South Korea-based telecoms firm SK Telecom and optical systems producer Zeiss are limited partners in the new fund, as are private equity firm HarbourVest Partners and investment manager Neuberger Berman. The fund will invest at growth stage, providing $5m to $50m in funding to enterprise software developers operating in areas like 5G technology, the IoT, cloud and network infrastructure, AI, cybersecurity and marketing. It will also back other funds.
SAIC Capital, the corporate investment vehicle for China-based carmaker SAIC Motor, raised RMB1bn ($145m) for a private equity fund after limited partner commitments from investors including automotive components producer Shinry Technologies. The fund is overseen by SAIC Capital’s private equity arm, Shang Qi Capital, and its investors include the firm itself and Shanghai Diesel Engine, state-owned SAIC Motor’s engine manufacturing subsidiary, as well as financial services firm Bank of Communications International Trust and venture capital firm Shanghai STVC Group. Founded in 2012, Shang Qi Capital invests in automotive-focused companies, with a focus on new energy technologies, high-end manufacturing and the internet of vehicles. The firm said it will target companies developing AI and 5G technologies, as well as trends in the electric vehicles and intelligent vehicles sectors.
Indonesia-based financial services firm Bank Negara Indonesia (BNI) aims to provide up to $250m for the first fund to be managed by its venture capital subsidiary, BRI Ventures. BRI Ventures was equipped with an initial $100m in capital, a figure BNI said it could eventually increase to $250m. It will operate as an evergreen fund and will invest at growth and late stage. The vehicle is managed by Nicko Widjaja, formerly chief executive of MDI Ventures, the corporate venturing vehicle overseen by telecoms firm Telkom Indonesia. He joined MDI Ventures in 2015 and was also program director for its Indigo Accelerator. MDI Ventures was reported to be helping BNI establish its corporate venturing unit, though Widjaja’s move had not been revealed at that point.
Venture capital firm Armilar Venture Partners completed the first close of a €60m ($67.8m) fund following commitments from the investment arms of industrial holding company Semapa and telecoms firm KPN. The TechTransfer Fund, the Portugal-based firm’s fifth, has raised more than $50.8m following an anchor investment by the European Investment Fund and limited partner commitments from a group of 10 other investors that included Semapa Next and KPN Ventures. The corporates were joined by academic institutions including engineering school Instituto Superior Técnico, unnamed family offices, founders of some of Armilar’s portfolio companies and members of its team. Founded in 2009, Armilar Venture Partners targets seed and early-stage companies in Portugal, Europe and the US, focusing on healthtech, cleantech and information and communications technology. TechTransfer will invest and fund the development of companies that aim to commercialise the results of research output, focusing on Portugal and other European markets.
Japan-based venture capital firm Genesia Ventures collected $45m for the first close of its second fund, having secured limited commitments from several corporates. LPs include financial services firm Mizuho Financial Group subsidiaries Mizuho Bank and Mizuho Capital as well as machine leasing service JA Mitsui Leasing, payment services firm Marui Group, internet company Mixi and real estate developer Tokyu Fudosan’s TFHD Open Innovation Program. Genesia will initially focus on investments in seed and pre-series A stage companies, supplying up to $5m for each startup. The firm will seek out new economy and digital media businesses, and technologies such as AI, robotics and drones, as well as digital innovations that are redefining traditional industries such as telecoms, publishing and real estate.
Telkomsel, the mobile network subsidiary of Indonesia-headquartered telecoms company Telkom Indonesia, launched a $40m VC fund in collaboration with telecoms firm Singapore Telecommunications. The fund was jointly formed by the companies’ existing corporate venturing units – MDI Ventures, and Singtel Innov8 – and will be managed by Telkomsel Mitra Inovasi (TMI), a new corporate venturing arm of Telkomsel that is intended to set up partnership deals with startups. TMI will managing investment funds and fostering collaboration with various Telkomsel businesses. The fund will target startups that have the potential to collaborate with Telkomsel, providing portfolio companies with access to the company’s ecosystem and assets.
People
There were many people moves in the telecoms sector over the past 12 months.
Christopher Bartlett joined US-based telecoms firm Verizon’s corporate venturing arm, Verizon Ventures, as senior vice-president for corporate development and head of ventures. Bartlett took over John Doherty’s responsibilities, which include joint ventures, strategic investment activity, acquisitions and divestitures, following the latter’s departure from Verizon. Bartlett came from investment banking firm Morgan Stanley, where he had been a managing director leading North American media and communications M&A for the firm for 14 years. Bartlett was based in New York but will now relocate to Basking Ridge, New Jersey.
Mark Smith, an executive director at Verizon Ventures, stepped down from his position. Smith joined the unit in 2007. He was one of GCV’s Rising Stars in 2017 and involved in more than two dozen deals during his time at Verizon Ventures. He joined Verizon predecessor Bell Atlantic in 1995. Verizon Ventures typically invests in seed to late-stage companies developing products, services and technologies that can complement or leverage its parent Verizon’s telecoms business.
NTT Docomo Ventures hired Ken Asada as managing director. Asada comes from Intel Capital, semiconductor and data technology provider Intel’s corporate venture capital subsidiary, where he was a Japan-based investment director. He was initially hired as an investment manager in 2011 and promoted two years later. His primary focus was robotics and artificial intelligence venture opportunities in Japan. NTT Docomo Ventures funds companies focusing on information and communications technology, big data, cloud and authentication security across all stages. Asada will report to Takayuki Inagawa, its president and chief executive.
DTCP appointed Irit Kahan as a managing director based in Israel. Kahan joined as an investment principal in 2015 from venture investment platform Vintage Investment Partners. She replaced Guy Horowitz, who transferred to the Silicon Valley office, as head of DTCP Israel. The firm has offices in Europe, the US and Israel, and its Israeli portfolio companies include marketing software provider Dynamic Yield and cybersecurity technology provider Morphisec. It has exited Fireglass and Replay Technologies.
MDI Ventures, the corporate venturing arm of Indonesia-based telecoms firm Telkom, hired Aldi Adrian Hartanto as head of strategic innovation. He had been head of investment at Mandiri Capital, the strategic investment vehicle for Indonesia-based financial services firm Bank Mandiri, having joined the unit in 2016, the year after it launched. Equipped with $100m of capital, MDI Ventures targets startups developing technologies in areas such as payment, advertising, big data and IoT. It also runs an accelerator called Indigo, which provides up to $180,000 in funding for each participant.
The CV arm also hired Shannon Lee Chaluangco as a Singapore-based investment director. Chaluangco came from C31 Ventures, the corporate venture capital subsidiary of shopping centre operator CapitaLand, where she was an investment manager from 2017 before becoming team lead in early 2019. Chaluangco managed the S$110m ($79m) fund on behalf of C31 Ventures, which participated in deals for portfolio companies such as retail data analytics software provider Omnistream, restaurant booking platform Chope and mobile commerce platform Mobikon.
Jamie Rowles, formerly a venture capitalist at UK-based multi-asset manager Jetstone Asset Management, joined Sky Ocean Ventures, a new £25m ($33m) corporate venturing unit for material innovation, responsible consumption and the circular economy as they apply to the plastics value chain. Rowles now serves as head of investments at Sky Ocean Ventures under group director Frederic Michel. During his time at Jetstone Asset Management, Rowles formulated fund strategy and allocated venture capital investments in deep research and technology. Sky Ocean Ventures was founded in June as a complementary unit to UK-based television broadcasting and telecoms services provider Sky’s other corporate venturing unit run by Emma Lloyd and James McClurg. The vehicle wants to increase its initial funding to £100m ($131m) with the help of third-party investors.
Pablo Moro Casquete, formerly head of innovation at insurance firm Mutua Madrileña, rejoined Spain-based telecoms firm Telefónica, as head of new business for its Telefónica Innovation Investment subsidiary. The firm runs six investment vehicles and has co-invested with public and private investors in startups based in Europe and Latin America. Its main corporate venturing fund, Telefónica Ventures, targets big data, blockchain and cybersecurity technology developers. Moro Casquete was previously at Telefónica for more than 12 years since 2006, then joined its Wayra accelerator network in 2014 as manager of global partnerships for Telefónica Open Future, before managing strategic projects and then its startup portfolio. At Mutua Madrileña, Moro Casquete’s role involved devising innovation strategy for Open Innovation, which partners external startups and venture capital funds, and Internal Innovation, focusing on intrapreneurship and intra-startup programs.
Marc Sabas, previously head of business development and partnerships of global core innovation at Telefónica, became venture principal at Centrica Ventures, the corporate venturing subsidiary of UK-based energy utility Centrica’s. Sabas told GCV he had spent five years at Telefónica, and in February 2018 he co-founded an intrapreneurial unit dubbed “Internet para todos”, where he identified and partnered technology companies disrupting the telecoms space. The partnerships include Project Loon and Facebook Connectivity, respective subsidiaries of internet and technology group Alphabet and social media company Facebook that seek to provide internet access to remote areas. Prior to joining Telefónica, Sabas was investment adviser for Europe and the US regions at Spain-based business-to-business (B2B) technology venture capital fund Mundi Ventures from 2015 to 2017, helping to structure and launch its fund management firm and raise two funds.
Lydia Jett was promoted to partner at the SoftBank Vision Fund. Jett joined the parent company in 2015, the year before Vision Fund was formally established, and has been leading and managing investments on behalf of the corporate in areas such as consumer internet, e-commerce, marketplaces, robotics and financial technology. Jett had spent six years as a vice-president at private equity firm M/C Partners, where she focused on communications, media and IT investments. She had previously held an associate role at investment bank Goldman Sachs and worked as an analyst at JPMorgan.
Kirthiga Reddy became venture partner at Vision Fund. Reddy joined SoftBank Investment Advisers, which manages Vision Fund, after an eight-year stint at social media company Facebook, having led its global marketing partnerships after spending six years as managing director for India and Southeast Asia. Reddy worked at software provider Phoenix Technologies and smartphone maker Motorola before Facebook. Reddy will now focus on investments in AI, robotics, health, bioengineering and the IoT technology sectors. She told TechCrunch she was “actively recruiting” staff, particularly female investors.
Carolina Brochado also joined the Vision Fund’s London office after four years at venture capital firm Atomico. Atomico hired Brochado in 2014 and made her a partner two years later. During her time at the firm she sourced and led investments in portfolio companies including ethical food supplier Farmdrop, logistics platform OnTruck and market research provider Streetbees. Brochado held positions at private equity firm Madison Dearborn Partners and investment bank Merrill Lynch.
SoftBank appointed its chief operating officer Marcelo Claure as head of its $5bn Latin America-focused fund. Claure is also chief executive of Sprint, SoftBank’s US telecoms subsidiary. He will be CEO of the unit and oversee its activities while continuing in his other roles. Bolivian-born Claure said: “Growing up in Latin America I witnessed first-hand the creativity and passion of the people… The SoftBank Innovation Fund will become a major investor in transformative Latin American companies that are poised to redefine their industries and create new economic opportunities for millions of people.”
SoftBank also hired four other senior members for its Latin America Fund, its SoftBank Group International (SBGI) unit and the newly formed SoftBank Tech Hub. Venture capital firm Sequoia Capital’s former chief financial officer, Chris Cooper, was recruited for the same role at SBGI, while Patricia Ménendez-Cambó, previously vice-chair at law firm Greenberg Traurig, became deputy general counsel at SBGI, serving concurrently as general counsel for the fund and Tech Hub. Francisco Sorrentino has joined the Latin America Fund and SBGI as chief human resources officer, having come from software provider Microsoft. The fund also hired its chief operating officer, Lee Bocker, who had held the same role at hedge fund manager TRG Management.
Seung Lee took on the chief financial officer position at SoftBank Ventures Asia, the rebranded corporate venturing subsidiary. Lee joined SoftBank Ventures Asia after a 15-year stint at investment bank Morgan Stanley, where he advised on M&A and helped the firm raise capital for corporate clients. Formed in 2002 as SoftBank Ventures Korea, the unit was initially a South Korea-only investor but gradually began making investments elsewhere in Asia before rebranding as SoftBank Ventures Asia with a brief to also target Europe and the US. In addition to managing SoftBank Ventures Asia’s funds and limited partners, Lee will lead the financial operations of the unit’s offices in China, Singapore and Silicon Valley.
Wesley Tang-Wymer, a former investor at SoftBank, joined Rucker Park Capital, the venture capital firm set up by SoftBank alumna Marissa Campise. Tang-Wymer joined the telecoms group as an investor in 2015 after two and a half years at VC firm Point72 Ventures and moved to SoftBank Investment Advisers, which manages the Vision Fund, in January 2017. Rucker Park is targeting $50m for its first fund. Its formation having emerged in June 2017. Campise was an investor for SoftBank’s now shuttered SoftBank Capital unit from 2014 and 2015 before working in a direct capacity for the corporate. She left in mid-2016.
Mobile network operator US Cellular’s strategic investments and partnerships team ceased operations, confirmed by former business development manager Susan Bova to Global Corporate Venturing. The company’s strategic investments and partnerships division made equity investments, focusing on startups developing 5G networking, cloud services, data, mobile payments, IoT agriculture tech, smart cities, artificial intelligence, blockchain and cybersecurity.
This year’s GCV Rising Star Mel Gaceta managed the unit between 2013 and 2016. He has most recently helped packaged food and beverage producer Mondelez International set up a corporate venturing arm. Bova told GCV she had left US Cellular “to explore other options,” while Jeff Cologna, an executive that has concentrated on strategic investments and partnerships since 2007, was unable to comment on his next move.
University backing
By the end of 2018, we registered three rounds raised by university spinouts developing telecoms-related technologies, much like in the previous year. The level of estimated total capital deployed in 2018 stood at $503m, up from $102m in 2017.
Kets Quantum Security, a quantum computing technology spinout of University College London, raised over £2m ($2.5m) in a seed round backed by database technology supplier Kx Systems. The round also featured VC fund Quantonation, plus $1.3m of grant money from two government innovation vehicles, Innovate UK and the Industrial Strategy Challenge Fund. Founded in 2016, the firm is creating a quantum computing-powered security range for communications that will work to protect sensitive information such as banking credentials and medical records. Quamtum’s processing power has led manufacturers to test supercomputers based on the technology, however its widespread adoption could render cybersecurity products designed for conventional computers ineffective.
Blu Wireless, a developer of 5G communication technologies spun out of University of Bristol, obtained £12.7m ($16.6m) in growth funding from investors co-led by mobile chipset manufacturer Arm. The round was also co-led by Calculus Capital, Kendall and MGL, with participation from Guinness Asset Management. The firm, founded in 2009, supplies connectivity technology for wireless network applications that enables the operator to limit latency and instability in data speeds. The company is currently focusing on a 5G telecoms technology known as millimetrei wave that could help clients such as transport networks deliver reliable multi-gigabit speeds. Blu Wireless already has a partnership in place with train operator First Group to implement its technology in the UK, and also expects to win business from the so-called industry 4.0 segment.