Five Hot Investment Areas In Telecom
Author: Derek Kerton, Chairman, Telecom Council of Silicon Valley, @derekkerton
Every year, the telcos from every corner of the world gather in Silicon Valley for a sort of upside down conference: Instead of the usual routine, where startups pitch big companies hoping for a deal, the Telecom Council community flips the model and asks the world’s most important telecom operators to explain to investors why they should consider working with them. Dozens of global telcos present what makes them unique, what makes them good partners, the right avenues to use to approach them, and, perhaps most notably, the top 5 technology areas where they have gaps or are otherwise seeking partnerships.
Figure 1: Vineet Gupta, Vice President of Distribution and Strategic Alliances at Peel presenting to Verizon, AT&T, SMART, and Deutsche Telekom at TC3 Summit 2014.
This insider’s information has some powerful implications, which break down along two lines:
- What tech do ALL the carriers want? Some topics are so hot right now that they are likely to appear in the lists from every one of the carriers. These topics represent the hot trends right now – the big waves hitting the shore. These are the ones you’ll want to surf, and where there are likely to be many successful venture exits within a couple of years. IoT comes to mind here.
For these big waves, VCs might want to back a horse in the race, or double down on a later round. Startups may want to pivot and paddle into the big wave.
- What tech need is specific to one or a few carriers? Each carrier is different. Some have cellular and fixed, some have media assets, cultures differ, regulations differ. Each carrier has some unique needs. An example would be Sprint, with unique spectrum assets in the USA. As a result, these carriers may articulate a technology need that is not common. This knowledge is extremely useful to startups and vendors who align with those needs. In the Sprint example, a multi-channel bonding technology would have more appeal, given their spectrum position. Startups that can meet those needs would now know exactly which carrier to go after first.
Either way, aggregating the views of so many carriers, and having them conform to that template, offers that beautiful math where the sum is greater than the parts.
For their top 5 priorities, industry insiders expect carriers to ask the innovation ecosystem to deliver technologies and partnerships in the following areas in 2016:
- IoT – The Internet of Things is probably the hottest space right now. Strategy Analytics estimates the market may be up to $71 billion per annum. Lots of carriers and entrepreneurs are fighting for a slice of that pie. Carriers, in particular, are fighting for ownership of the customer relationship, under assault from Apple, Google, and Amazon. Carriers need hardware products, business models, device management solutions, home security, digital security, and privacy management solutions.
- NFV / SDN – Network Functions Virtualization is also extremely hot. And NFV is an innovation multiplier – that is, it itself is an innovation where carriers need new solutions, but its role is to enable carrier agility. The agility to launch more other innovations more quickly, and with lower risk. Right now, this means NFV solutions, hardware, VNFs, orchestration and management solutions, but eventually they’ll also seek new VNFs that support new carrier services. NFV is also tied loosely to SDN, or the management of the physical network as software, and there’s plenty of interest here, but it may be a little further off for deals.
- Customer Experience – This year, carriers are asking for more solutions around improving customer experience. Support, retail, on-device support, remote support, etc.
- Media Plays – More and more major carriers are trying their hand at media distribution, production, or ownership. They are looking for ways to create or capitalize on synergies.
- See it Through – The telcos are shifting from just asking for a technology, to asking “Show me how your tech appeals to MY customer.” Startups that have a value to the end customers, and can explain their sell-through to carriers are well-positioned this year.
Listen to your market, do these five things, and your odds of a telco deal get better. A much wider batch of carriers will share their needs at TC3, and we can report back after that. Of course, we’re not going to let a great opportunity for business development go to waste, so TC3 also provides lots of tools for the startup community to take advantage of the presence of so many carrier outreach groups, and to make their pitch, too.
TC3 Summit is not a typical conference; it is the annual meeting and matching place for telecoms and innovation – in Silicon Valley at the intersection of telecom, internet, devices, wireless & VC.