Venture Building In A Corporation: An Unexpected Journey

Telecom operator Telefónica needs no introduction. The company has been around for almost a century and serves over 380 million customers in 12 countries. Wayra Builder, Telefónica's venture builder, leverages the company's considerable assets and entrepreneurial ecosystem.

About Wayra Builder

Telefónica realized they needed a way to not only invest in startups but also create their own independent companies. Their investment thesis involves investing up to €350k in digital startups in the markets in which Telefónica operates. They take a maximum of 20% equity to avoid compromising future investments.

They start by identifying and validating the idea, seeking approval from the Investment Committee, building a team if necessary, and looking for co-investors. If the idea receives a green light, they found the startup and provide support for the development and launch of the minimum viable product (MVP) for up to two years or until the next round of investment.

Learnings So Far

Telefónica has been investing in companies since 2006 and has experience with over 900 investments. So when they launched their venture builder in 2020, they expected a roller coaster journey… and still, there were many twists and turns along the way.

They learned the importance of effective communication both internally and externally about their investment thesis and how to reach them. They found that not all areas of the company had opportunities for spin-outs, so it was necessary to identify the areas that did. They also realized that their employees who wanted to become intrapreneurs and create startups needed support in building their teams.

Telefónica's first startup automates customer acquisition processes. They collaborated with another venture builder to co-create the company and learned the importance of hiring the CEO first and allowing them to build the rest of the management team. They also realized the need to give the startup freedom to pivot, even if it meant deviating from the initial technology transferred. They finally discovered that having a majority corporate equity stake in the early stages hinders attracting investors for the next round of funding.

Their second startup is a cybersecurity company protecting business documents with an invisible watermark for traceability. They created this startup themselves using Telefónica's technology and leveraged their entrepreneurial ecosystem to find co-investors and a CEO. They learned the value of having co-investors as part of the idea validation process and the importance of forming a multidisciplinary team with diverse profiles. They also collaborated with another venture builder to explore startup ideas around pain points identified by their business units.

There were several other learnings, some of which even led them to re-think their approach:

• Regularly check in with the investment committee or decision-makers to ensure alignment before investing significant effort into an idea. Involve other experts in the company, including salespeople, early on in the validation of ideas, as they can become sponsors and support the idea when presenting to the investment committee.
• While short-term pain points may be prevalent within the organization, when creating a startup it is crucial to focus on mid to long-term opportunities that require time to establish a startup, build an MVP, and gain traction.
• Be open to ideas from both internal and external sources, experimenting with different sources, and being willing to take risks. Other venture builders and academia are excellent external sources of ideas and potential entrepreneurial talent.
• Ensure realistic policies around technology transfer, licensing, equity, and position in the startup ecosystem
• Provide support to founders both before and after the creation of the startup, offering advice for up to two years or until the next round of investment. They offer a multidisciplinary team that provides 360 advice, business creation capabilities, access to infrastructure and experts, and support for expansion.