Telco Funds like Reliance Jio - need of the hour

The vast majority of startups these days are internet based — using the power and reach of the digital ecosystem to offer new products, services or disrupting the status quo, giving a new way to do things. Most of these startups rely on telecom networks to connect to customers—be it B2C, B2B, B2B, B2C etc. While there are plethora of funds to cater to this `ideas’ market, the need is to create a fund for telecom specific ideas. Startups with ideas that help improve mobile & fixed line internet connectivity, data exchange, Wi-Fi innovation, content delivery across networks and much more.

In the absence of such a fund telecom most often gets overlooked with telecom ideas competing with internet and other business plans for funding. Besides, clubbing telecom ventures with others, say, e-commerce, food tech, biotech, bill payment, or gaming would defeat the purpose needed to build depth and scale, much needed for a telecom venture to succeed. For example healthcare and biotech ventures have dedicated funds like Deerfield, RA Capital, Wellington Partners operating in US and European markets. Such funds work closely with startup management teams to provide strategic direction to new ventures.

India already has 800 million plus mobile users, though the population that uses smartphones is far less and out of those people who use mobile internet number less than 200 million. That in itself provides an opportunity for multiple ideas –from Wi-Fi to cloud services — to boost mobile internet and of course the uptake of fixed line broadband to create robust, high speed data access for the ‘connected home”.

There’s a need for a dedicated fund for telecom, it’s not just about writing a cheque but also identifying the right team, provide expertise and handholding the venture in its early days. Someone specializing in telecom would be better than say a fund dedicated to e-commerce or food tech ventures for instance. In this regard the Rs 5,000 crore Reliance Jio Digital India Startup Fund launched on September 1 is a commendable effort. The aim of the fund is to build a platform to encourage young entrepreneurs who want to create businesses of the future in areas including rural livelihood and e-commerce. This is one of the largest venture funds in India.

There’s an urge for dedicated fund that can appreciate the specific needs of telecom sector and help take ideas to market and build scale companies. For example digitization, especially Wi-Fi roll out would help states across India to leverage the huge potential of telecom and technology in far flung areas in India. A telecom fund that invests in such an idea could help accelerate adoption of data driven services and overall growth of mobile internet. Globally YCombinator, Qualcomm Ventures, 500Startups, Deutsche Telekom Capital Partners and others do invest in telecom startups. Some of these funds are diversified, with telecom being one of the several areas they back.

Overall, the venture industry must create a pool of funds in India that can help kick start local telecom ventures. Telecom entrepreneurs who know the local market but don’t have risk capital can reach out to such a dedicated fund to try out their business ventures. In this regard the startup ecosystem in India is healthy — from about 3,000 startups in 2014, various reports suggest, there will be almost 12,000 startups by 2020. While this augurs well for the country it’s not always easy to get capital. For example, 2016 has not been great to get access to funds. That’s thanks to an overwhelming dominance of e-commerce ventures and funding such ideas received in previous years. The problems of that sector (lack of profitability, poor unit economics etc) could have a negative impact on funding startups in telecom. That’s another reason why a dedicated telecom fund will be better.

Of course large telecom companies do support ventures. Globally telcos like Telecom Italia invite ideas and support some of them. Telecom Italia holds events like hackathons and startup weekends to attract ideas. Besides the telco offers seed capital, co-working spaces, mentorship, Wi-Fi to help create an enabling ecosystem. Since Telecom Italia launched the program six years ago it has supported about 300 ideas. Similarly, Deutsche Telekom has a venture capital arm T-Venture, encouraging ideas with financial support.

In India, dedicated funds could solve telecom specific problems. For example, despite the growth and penetration of mobile services in India, data consumption is low when compared to global averages. Outside India’s big metro cities and tier 1 cities, data consumption is even more skewed. Affordability is a challenge which many large companies have tried to address by lowering costs. Data costs are already low. The industry must seek out new models and ideas that help overcome the challenges. Startups entrepreneurs are meant to take on such challenges. The time is ripe to back such entrepreneurs with dedicated telecom venture funds.

By Nigel Eastwood

(Nigel Eastwood is a technology investor and International entrepreneur, founder of the 6th largest internet service provider in the United Kingdom. In India, he helped in developing Wi-Fi operator and instant messaging platforms with over 200m users)

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