Telstra Ventures, the investment arm of Australia’s largest telco, will place its first person on the ground in Asia by the end of August with the addition of a Partner-level executive based in Beijing.
Founded in 2011, Telstra Ventures already has offices in Melbourne and San Francisco. Given that its last two investments have been in Asian companies, an office on that continent makes sense, says Telstra Ventures’ Australian managing director Matthew Koertge.
“I’m spending a lot of time in Asia as it is,” Mr Koertge told InnovationAus. “The region is increasingly of interest to us. Our investments so far have been largely split between Australia and the US, but now we are also looking further afield.”
Telstra Ventures invested in video analytics company Gorilla in Taiwan in March, and voice technology company enePath in Singapore just two weeks ago. Telstra Ventures’ Asia specialist will be co-located in the company’s Beijing-based China office.
“Telstra already has a large presence in Beijing,” Mr Koertge said. “We have our investment in Autohome, and the Chinese market is increasingly active.” Telstra owns half of Autohome, China’s largest online car market. It listed on the NYSE last year – Telstra’s investment in the company is now worth over US$2.5 billion.
“It’s been very hard for foreign companies to invest in China, especially in the telco space, but there are opportunities,” Mr Koertge said. “Telstra has a strategy to grow in Asia, and putting a Telstra Ventures person there makes sense.” He says it is a partner-level position, and will be officially announced in “a couple of weeks.”
In addition to Mr Koertge and US managing director Mark Sherman, Telstra Ventures has ten partners – eight in Australia and two in the US. The addition of an Asian partner is therefore significant in terms of its overall operations.
In less than four years of operation, Telstra Ventures has made 24 investments. They range from a few percent in small operations that Telstra thinks have potential, to purchasing large companies outright. The total amount invested is not disclosed, but InnovationAus estimates the figure at around $500 million.
The largest and highest profile investment was in Silicon Valley video analytics and ‘monetisation’ company Ooyala. It was only the second investment Telstra Ventures made, in 2012, but in August 2014 it acquired the company outright for U$270 million (on top of its initial investment).
Ooyala now operates as a wholly-owned subsidiary of Telstra, and as such is no longer in the Telstra Ventures portfolio. Neither are other companies that Telstra acquires outright – Telstra Ventures is for ‘strategic investments’.
- Whispir (December 2012, incident management, Melbourne)
- Health Engine (May 2013, medical appointments management, Perth)
- Kony (June 2013, mobile app development, Orlando, FL)
- Box (December 2013, file sharing, Silicon Valley)
- Mattrixx (May 2014, real-time telco chagrining, UK and Silicon Valley)
- Big Commerce (November 2014, eCommerce, Sydney – HQ moved to Austin, TX)
- Panviva (December 2014, business process management, Melbourne)
- Zemperium (February 2015, mobile security, San Francisco).
Mr Koertge says Telstra Ventures looks for companies that are not only good investments but which are a fit with Telstra’s strategy. “We have seen some companies that may have made financial sense, but weren’t synergistic. We typically look for a reasonable minority stake in companies that we can add value to and which can add value to Telstra.
“We typically take a position which ensures us a seat on the board, but with a single digit (below 10 per cent) equity investment. We like to get our hands dirty. Three areas of interest have been video, health, and mobile security.”
Mr Koertge says Telstra Ventures identifies potential investments in two ways.
“Our team might find a prospective investment, and then we will take it to the relevant business unit within Telstra to see if its products are a fit. Or a business unit may find a company they are interested in, and ask us to check them out. When we do that, we also look at that company’s competitors – the investment might end up being made there.”
The second way, where the business unit comes to Telstra Ventures, is the most common. “But the most important criteria for investment is the strategic fit with Telstra’s strategy. We are looking for products we can leverage, by using them internally or selling them through our activities to others.
“The leverage, the synergy, is the most important thing. We are not a finance company, we are not a venture capital company – we are a telco. We are not trying to create or drive Telstra’s strategy – we are following it.”
Telstra incubator is muru-D, which typically makes first round investments of around $50,000 in small startups, which might value them at $1 million or so. That is a long way from the millions that Telstra ventures invests, but Mr Koertge says there is a synergy.
“I talk a lot to (muru-D head) Annie Parker. It’s possible our worlds could converge, and some muru-D investments could become Telstra Ventures investments. But the startups are in a different world – it is very unlikely a small company could support the sort of relationship we look for when we look for Telstra Ventures investments.”
The life of a Telstra Ventures partner is a constant quest for new opportunities. Mr Koertge says that in less than four years they have had a look at over 2500 companies. Some are quickly dismissed, but some get well down the path of due diligence before being rejected, usually because the financials don’t stack up or because on closer examination the fit is not right.
But new companies are constantly appearing, and even well-established ones can make sense – Melbourne’s Panviva is a good example. It has been around for more than 20 years, but Telstra made a significant investment just last year to help it further develop its SupportPoint cloud-based business process guidance software, which Telstra is now using internally.
So, could other Australian tech companies be investment targets. If they think they are a fit, should they approach Telstra Ventures?
Absolutely,” says Mr Koertge. “Give me a call.”