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One of the really interesting trends in Europe right now is the keenness of the old guard – particularly old incumbent telcos – to invest in the new. It’s an enthusiasm that’s plainly on show today, with key announcements from Deutsche Telekom and Telefonica.
According to Bloomberg, DT’s T-Venture arm is to be shaken up, with the crucial change being its new-found ability to buy majority stakes in the startups it invests in. And Telefonica has revealed a new €300m international VC network, focusing initially on Spain, Colombia, Chile and Brazil, that includes €68m of its own cash.
But wait, there’s more! It’s not a telco, but SAP has also put €2.5m into the High-Tech Gründerfonds (HTGF) II fund, a public-private affair that provides €500k in seed cash and up to €1.5m in the aftermath to German startups.
These moves all provide a great illustration of what’s going on, and why.
As I recently discussed, big telcos, especially DT and Telefonica, are investing like crazy, in an attempt to find the next big thing after voice (a declining market) and data (growing for now, but not indefinitely).
T-Venture has already invested around €100m in a total of 80 startups, and it now looks like the company is going to take this strategy up a notch. Minority stakes and seed funding are all good and fine – and DT still has big plans there, with €240m set aside – but carefully chosen majority stakes (a further €100m lined up) make real integration easier.
And T-Venture spokesman Nico Goericke was quite explicit on that point, noting in the Bloomberg piece that majority-stake startups would be managed by DT itself, not the venture arm. We’ll have to wait and see how such integration works out – particularly given the culture clash that DT CEO Rene Obermann has himself hinted at – but the possibilities are intriguing.
On Telefonica’s side, the Spanish giant is trying to use its new Amerigo VC network to invest in areas that have been lacking in VC funding, such as “other European countries, Latin America and Asia”. Basically, a boost for anywhere that’s not Silicon Valley or London.
The software giant
SAP’s investment in HTGF II is a relatively small amount of cash but not insignificant, particularly as the fund is trying to fill the seed-stage gap that bedevils so many startups in Germany. (It also gives SAP the chance to trot out the cheesy but not incorrect line that it is “the most successful German startup of the last 40 years”.)
HTGF MD Alex von Frankenberg summed it up like this:
“On the one hand the cooperation with young technology companies enables groups to get access to extraordinary innovation, and on the other hand enables our portfolio companies to provide further support in developing the company.”
But Jörg Sievert, the MD of SAP Ventures, also pointed to a more immediate benefit: getting some of HTGF’s portfolio using SAP’s HANA in-memory database tech in their products.
In all these cases, we’re seeing older companies fighting against irrelevance via strategic deployment of their still substantial cash reserves. But we’re also seeing increasing confidence in the quality of the startups they’re targeting, which will mostly be outside the English-speaking world.
There’s a variety of motivations at play here: wanting to coopt a younger spirit and fresher ideas, wanting to spread an existing in-house tech, and straight-out wanting to make good returns. But it all adds up to healthy and very busy activity.