Telefonica’s New $378M Latin American Incubator Fund
By: Mike Butcher ~
There are a few significant trends going on in this particular era. There is an explosion of technology adoption and innovation happening in developing regions like Latin America, and a few of us are aware that big lumbering corporates are struggling to deal with the pace of change – indeed, it seems like the old R&D departments of yore are a ridiculous concept when enormous disruption could come from Zuckerburg’s Harvard dorm. But there are few companies realising how to latch onto that innovation.
One of them appears to be global telecoms giant Telefónica. Today it launches Amérigo, a $378 million (€300 million) fund focused on Latin America. Combined with its growing network of Wayra incubators, and it’s clever focus on Latin America, this appears to be one of the more interesting moves made by such a big company. And one which its competitors may not even be aware of.
Led by its digital arm, Telefonica Digital, Amérigo is cleverly based “outside of the main centres of VC activity”, namely Silicon Valley, New York or London. Venture capital funding and experience is thin on the ground on Latin America, so the ground is fertile.
Amérigo will focus on Spain, Colombia, Chile and Brazil – where it has governments, financial institutions and private investors already on side – with plans to expand in Latin America. Startups applying for funding there can expect an initial investment of about $1.3 million (€1 million).
In Spain, the initiative is supported, within the framework of the program Innvierte, by the Centre for the Development of Industrial Technology (CDTI), reporting to the Ministry of Economic Affairs and Competitiveness. To date, the program has already made investments in five Spanish technology companies.
An initial investment of $85.7 million (€68 million) will cover operations for the next five years allowing an estimated $1.3 billion (€1 billion) worth of projects to be funded.
Interestingly, it is not ruling out working in Asia and Europe although I would bet that will take some time to execute, and there is enough growth in those initial regions to keep it busy.
Telefónica already has a network of Wayra incubators covering 145 start-ups in 12 “Wayra Academies” worldwide. London, Berlin and Ireland are the most recent additions.
In addition we understand that Wayra is shifting its investment policy towards convertible notes, making it even easier for local VCs and Angels to get involved in selected companies.
What’s most interesting about this strategy is that Telefónica has realised that an older ‘internal R&D’ approach is now outdated. It is getting in early on innovative companies and building a network in which it will have right of first refusal on new companies and products.
It will be interesting to see how their competitors react, if at all.