Telefónica’s startup and innovation arm Wayra celebrated its tenth anniversary at MWC 2021. Its recent spinoff, Wayra X, focuses especially on consumer business startups. I had a discussion with Luisa Rubio, Head of Wayra X, about the company’s experiences, corporate venturing, the telco’s role with startups and what’s hot in the market now.
Corporate venturing is never easy. The target is always nice: a corporate invests in a startup, learns new things, makes returns with successful startups and utilizes whatever new innovations emerge. Also, startups grow faster with a corporate partner.
But in reality, it is not so simple. Many startups lose a lot of time running extremely long free pilot projects and sourcing processes with carriers. At the same time, telcos have also lost many business opportunities when they haven’t been able to take new innovations and products to market.
It is not easy to align the targets of startups and operative units. Corporate VC people and operative business units have their own incentives, and often the operative units must produce results each quarter, while startups must build longer term success.
Meanwhile, it is not easy to get corporate VC’s to be agile enough. Many startups are also skeptical. Typically the corporate venture model works better if the corporate VC is available to help without trying to dominate the startup with its own targets and processes.
Luisa admits that Telefónica has also experienced these challenges, but says they have been able to find a balance so that Telefónica can really support startups. In fact, Luisa herself worked with Telefónica’s business development earlier, and has seen in practice how they are able to help startups to market.
Wayra was originally started by José María Álvarez-Pallete (now Telefónica’s CEO), who at the time was working for Telefónica in Latin America, and saw entrepreneurs in many countries where Telefónica operates moving to Silicon Valley to get any serious interest in their companies. A lot of technical talent was lost that way. Wayra was started with the motive that it would be better for Telefónica’s business to develop the local ecosystem and better utilize local talent.
Three years ago Wayra evolved from an accelerator to a corporate venture capital to invest in more mature and technological startups that fit with Telefónica’s core business. Wayra X was launched in November 2020 to focus on B2C startups. One of Wayra’s important targets is to help startups get their first corporate customer or partner. Typically it takes months or years from a startup to start to work with a corporation.
Wayra can invest 150,000 to 250,000 Euros in a startup, typically in the Seed or Pre-Series A phases. They are never the lead investor, and they follow the terms of the lead investor. They can also invest using SAFE and convertible notes that are quite popular in early phase rounds today. Luisa admits that they also have the typical challenges of corporate ventures in the investment process – they have a more complex corporate type approval process, as opposed to independent VC funds that typically can move faster.
Luisa emphasizes that Wayra’s investments are not only about money. They can really help startups to get business. Telefónica has 350 million customers globally. Now, Wayra also extends its geographical focus to new areas like Southeast Asia. Luisa said that Telefónica made more than 35 million Euros in business with their startup network in the last year.
Hot or not
As I wrote about hot areas at this year’s MWC, I wanted to hear Luisa’s opinion about what hot areas she sees now at MWC and in the startup space. First off, she mentions entertainment and content. She feels those are areas Telefónica can also engage younger generations. She emphasizes that “content” here doesn’t only mean traditional content, but also things like platforms for sharing personal content and gaming. (Telefónica owns content companies like Canal+.)
She didn’t fully agree with my own hot area list. For example, she commented that health tech startups are now linked to the pandemic era, but a year from now people will not be so interested in them anymore. However, she did say that opportunities in personal wellness data will be significant.
Security and digital identities (which also made my list) are not areas Wayra X is focused on, Luisa says, because Telefónica and Wayra are already investing in those areas, and they don’t see them as a good fit with Wayra X’s consumer focus – which sounds a little surprising, considering security and things like digital identity management are becoming highly relevant for individuals too.
Wayra X has invested in eight companies total, and aims to make 10 investments a year. Krew and Stack are new cases that were at MWC this year. Regarding success stories, Luisa especially wanted to mention Peoople, which has just acquired its biggest European competitors.
The cooperation of telcos and startups hasn’t been easy, but Telefónica – which operates in many countries where it is hard to get early phase investors – Wayra could play a significant role for both Telefónica and local startups. We’ll have to wait and see whether Wayra’s outcomes can have a positive impact on telecoms and startup markets globally.