Earning a return from digital entrepreneurs

Digital entrepreneurs need customers and capital. Global corporations need to tap into digital innovation and creativity. When they engage properly, it makes a massive difference to all the parties.

Initially launched by Telefonica in Spain and Latin America in 2011, there are now 14 Wayra accelerators (or “academies”) in 12 countries. The concept is relatively simple: build a physical space, run a competition to find the best digital startups, invest in them, and house them for a period of time during which they can grow. Applicant companies don’t have to be telephony, mobile or app-based companies – they just have to be digital ones.

As a result, Telefonica has invested in approximately 350 digital startups in the past three years. “As a corporation, that puts us ahead of the game.”

“What we are doing would have been unimaginable even five years ago,” says Simon Devonshire, director of Wayra Europe. “Historically, corporations engaged in acquisitions by paying large sums for individual companies. Wayra invests €40,000 into a fledgling business; in some cases, it is still only just an idea on a piece of paper.” Investing in digital startups provides “a tangible glimpse of what the future will look like.”

“The impact of the digital revolution is as significant and profound as the industrial revolution,” he says. “All businesses – large or small – have to have digital at their heart.” He points out that the retailers who did well in the UK this Christmas shared one thing in common – the success of their online channel.

Digital provides the capability for a small company to achieve vast scale, really quickly. “The digital opportunity can be summarised in one word,” he says – “exponential.”

For Telefonica, there are obvious benefits in being close to so many bright young businesses. Approximately 50 per cent of the Wayra intake are in some form of active trial; this can mean any stage between small scale or market roll-out. In the UK, O2 has just launched ClipIt, a video messaging service created by Six 3, a 2012 graduate of the Wayra UK academy.

Another startup in Wayra UK right now is JollyDeck, whose business applies gaming principles to corporate learning programmes. O2 used Jollydeck to train its own people on the rollout of 4G. There can’t be many multinational corporations that would use a two-man startup to host the ways its workforce learned about a vital new service, observes Devonshire, “but it worked.”

And to date, the mortality rate among Wayra’s startups is currently eight per cent – a negligible figure compared to average. And it isn’t that Wayra keeps shelling out cash from its deep pockets; “they get their €40,000 and that is it,” says Devonshire.

See the full list of Wayra UK’s current academy.

He argues that large corporations must embrace this type of thinking not just in order to survive – being digital is vital to growth – but that is incumbent on them. What these digital startups need more than anything else is investment and distribution. As an investment class, large corporations are uniquely placed to provide that. Very few investors can provide both distribution and money in the way that corporations can.

Devonshire points to an initiative that has been backed by Centrica to find ten of the UK’s leading social entrepreneurs who are working to tackle energy challenges, and making real, sustainable change in their communities.  The aim of the Big Energy Idea is to help social entrepreneurs to grow their ventures. Devonshire would like to see more large businesses coming together in this way: “if corporates could collaborate as investors in a way that is advantageous to the startup, then we could take their prospects for growth to another level again.”

So Wayra gives O2 immediate proximity to digital innovation and entrepreneurship. But make no mistake, says Devonshire, the primary driver for Telefonica is a  financial one – and the book value of the startups that it has invested in Europe alone is worth in excess of £100m.

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