What is the overall investment thesis at Telus Ventures?
It is no secret to the readers of GCV that the importance of corporate innovation is increasing and that corporate venture funds drive deeper and more productive engagement in the entrepreneurial ecosystem. Our investment thesis is that our organisation can perform better over the long run if we find, fund and support high-potential innovations. We need to do our job well to help our organisation defend core markets, pursue new ones and have capital-efficient ways of learning about game-changing technologies. Specifically Telus Ventures drives investments that span the spectrum from tactical opportunities, where the focus is to drive short-term product development or revenue targets, to those that provide less immediate financial return but contain longer-term compelling insight or market value to Telus.
How does Telus Ventures support its portfolio companies?
Our team supports investee companies through our internal innovation programs where we assemble sector-specific portfolios in conjunction with proven entrepreneurs, initiatives we call catalysts, co-investor syndicates made up of global telecoms partners, a talent Bench made up of Telus team members of all levels that work with our portfolio and numerous other approaches that are a departure from more traditional models. We do this to drive value to Telus obviously, but we also believe it helps the companies to be more successful.
We measure ourselves constantly in how this activity is translating directly to value for our portfolio. We do this by having close relationships with our investees as well as regular polling of our portfolio.
How does your Bench program work?
The Telus Bench is a program we designed to give our investees the opportunity to work directly with, and exchange ideas and expertise with, thought leaders across our organisation. We have a team of Telus people who support portfolio companies as resources, sounding boards, advisers and, in some cases, board members with skillsets matched to the current needs of the company.
Do you work with entrepreneurs before taking stakes?
Over the past year, we have accelerated efforts in this realm. In particular we have established a significant partner network designed to serve entrepreneurs and support them in bringing their vision to fruition. These include deep relationships with leading Canadian and US-based incubators and accelerators, financial and distribution partners, including a global consortium of other telecoms companies with CVC arms where we might jointly co-invest and sign distribution agreements covering multiple countries and regions.
Telus Ventures also assists entrepreneurs prior to a potential investment through internally developed programs such as FirstStep, a guided market exploration process where companies spend six to eight hours working with Telus innovation experts to develop holistic roadmaps to determine where technology and market developments are most likely to impact their company.
Innovation centres in our Telus offices in Vancouver, Toronto and Montreal have leading-edge living labs with the latest technology tools where we regularly host open houses for entrepreneurs and executives to take part in thought leadership discussions, hackathons and exploration sessions.
How has Telus Ventures evolved historically and what will its role be in the future?
Telus Ventures was founded 16 years ago and we have traditionally been very quiet about our activities and accomplishments. It must be that we are Canadian. In that time, we have made over 60 investments and had some great successes, both from a strategic impact to Telus corporate but also from an IRR [internal rate of return, a form of annual performance measurement] perspective as well. Not surprisingly, we have also learned some lessons.
In some sense our role has not and will not change – namely to be on the front lines in Telus’s interactions with the entrepreneurial ecosystem. What has changed since we brought in a new team a little over a year ago is how we are going about it. While in the past we were focused on more traditional corporate venture capital investments, we are now pushing the envelope in such areas as catalyst initiatives – which I mentioned – through our carrier-focused global syndication deals, in leading social impact investments in areas such as healthcare, through market force design workshops called First Step, as well as several other forms of activity that we believe are important. We are also taking a much harder look at ensuring we internally leverage the portfolio company’s expertise and approach to problem-solving.
What is the ideal investment case for you?
There is the usual venture type of thing – great team, hard problem, unique intellectual property and so on. But more broadly, we look for two things – deals that are either going to drive significant value in our customers’ eyes and entrepreneurs committed to being good partners. The ideal investment has great financial potential for sure, but through our capital and organisational reach the combination can be transformational, for the benefit of both the investee and our organisation.
Telus Ventures invests in companies irrespective of stage of development. With that in mind, what is the importance of financial and strategic returns for the firm as an investor?
There is a tendency by some people to think of financial and strategic returns as mutually exclusive. For the most part I do not agree. In most cases a good product and a good investment prospect – an investible company – go hand in hand. Sometimes we have to have the discussion with business unit leaders that a product or technology they like is not necessarily a great partner because it is unlikely to attract financial investors.
Our process is to work with our partners internally, define and triage the problems we care most about solving and then go to work to find the best groups solving those problems – the potential investments that can blend both the strategic and the financial return elements.
Telus Ventures invests in six primary areas – healthcare IT, internet of things, big data, fintech, digital security and identity. Why these areas?
It is a combination of areas that are important to both our near-term business objectives as well as those that give us insights into how we will differentiate and compete over the longer term. We are a communications company that ultimately provides services to consumers and businesses in areas and ways in which they prefer.
Is not healthcare somewhat unusual for the venturing unit of a telecoms provider?
While most of those areas might be considered fairly standard areas of interest for our peer group, our healthcare focus is unique. 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.
Do you take limited partnership (LP) stakes in any funds?
Historically no. However, this year we made our first commitment as an LP to a Canadian fund with a number of other corporate LPs. I do not expect this will be a common occurrence. Frankly, I see much more opportunity in us being a GP (general partner – managing funds) potentially with some LP interest as well in a sector or geographic-specific pool of capital, like healthcare, in combination with partners such as providers, hospitals and government agencies. That, to me, feels like a far better way to leverage our learnings and reach.
Overall we really try to be thoughtful about what a company needs as it grows, and provide, wherever possible, helpful support along the way.
How do you see the Canadian startup and innovation scene?
It has never been better. I could talk for literally hours about all the great things going on, from seed and series A financing rounds that rival any market, to huge exits, to global companies such as Google and Amazon setting up major labs here. It is just incredible. The startup ecosystem in Vancouver and Toronto were both recently ranked in the top 10 ecosystems in the world behind Silicon Valley.
We are also benefiting from the political situation in the US and attracting incredibly talented entrepreneurs in increasing numbers. The number of US and international investors that are here searching for deals on a regular basis just keeps increasing. I am not going to call it one of those Silicon Whatever derivatives. It is truly standing on its own and it is amazing.
What are the most interesting trends you have been observing in telecoms? How will they disrupt the industry in the medium and long term?
The macro trend that carriers face is rapidly increasing competition and customer expectations. The differentiation needs to come from smart capital deployment, incredible customer service and anticipating technology development trends that will matter most to customers.
The key trends obviously include bandwidth increases, as we transition over the next few years to 5G, but also cyber-security, the internet of things, particularly in areas such as healthy homes and smart cities, and, more slowly, the increase of data consumption in verticals such as transportation, agtech and autonomous vehicles. Also, as part of a telecoms firm that has eschewed proprietary media and content plays in favour of diversification into areas like healthcare, I think it will be very interesting to watch those kinds of differences in strategy play out.
Cleary, horizontal technologies such as blockchain and artificial intelligence – both of which I think as a VC I am contractually obligated to mention – and their application across the vast data sets we have will be interesting, but played out against the broader hype and adoption cycle backdrop.
Finally, while it has been happening slowly I think we are close to a tipping point, where the increasing accessibility and portability of data in areas such as healthcare is very exciting and where I think an especially high number of interesting opportunities will present themselves in the next 12 to 36 months.
