SingTel – BT

Can SingTel be a good venture capitalist?

WHEN established businesses become too expensive to buy, the next best option could be to try and snap up young ones before they turn big and successful. Punting on the next Google or Facebook has long been the game of venture capitalists but SingTel joined the table last month with the establishment of its own venture investment arm Innov8.

Armed with a $200-million war chest for the next three years, Innov8 is on the prowl for promising start-ups to complement its parent’s mobile, broadband and pay-television businesses.

Technology giants such as Intel and Google too have venture investing units but SingTel ranks among a mere handful of telcos globally to try its hand at this game. For Innov8 to be successful, however, it must be prepared to shrug off its parent’s legacy and become somewhat of a rebel child.

Like most operators, SingTel realises that the future of telcos lies not in providing ‘dumb pipes’ or carriage services but in offering intelligent applications. To get there, however, the operator cannot rely on financial muscle alone.

It must be open to working with others, pounce quickly on emerging market opportunities and think out of the box when push comes to shove.

All these would require a drastic mindset change for the once-lumbering telecommunications giant.

This is something that is arguably still new to SingTel, given its roots as a monopoly and a state-owned entity. The firm is showing signs of becoming more nimble in recent years but the evolution is still very much a work-in-progress.

With its local infrastructural stranglehold, the company has been known for being somewhat of a ‘bully’ when dealing with smaller companies in the past. It remains to be seen if this reputation will come back to haunt SingTel as it now welcomes upstarts with open arms.

Many would also argue that it takes a good entrepreneur to spot another, but SingTel has never quite seen the world from the bottom up. The challenges and difficulties of being a start-up are foreign to SingTel as it enjoyed market dominance from the word go.

Perhaps the only time SingTel had a taste of starting afresh was when it branched into the pay-television market and played second-fiddle to StarHub in 2006. Even then, the company could rely on its financial clout to force its way up, outbidding its rival to score the Barclays Premier League last year.

In the fast-moving Internet era, however, money alone does not do all the talking. The technology stars of today are mostly software companies armed with nothing more than a few computers, servers and broadband access.

These upstarts may not be as hungry for seed funding as the dot coms of yesteryear. Tools such as Facebook and Twitter, along with marketplaces such as Apple’s AppStore, have given them the ability to reach millions around the world at little or no cost.

The advent of open-source software and Web-based storage means these firms can keep operating costs to a minimum. Venture capitalists bent on courting these companies must then show they can bring something more to the table besides mere dollars and cents.

Finnish game developer Rovio, for example, achieved overnight success taking a bite at the iPhone. Its runaway hit, Angry Birds, has garnered over seven million downloads to date, lifting the outfit from the depths of obscurity to become the new million-dollar mobile sensation of today. This was achieved with only one round of funding from a hands-off angel investor.

The challenge for SingTel’s Innov8 is to find more of such companies and convince them it can resist its parent’s controlling instincts. On its part, SingTel must also give its new unit the full blessing to do so.

This is an important pre-requisite as the search for the next big thing could turn up results that are not music to SingTel’s ears.

For instance, a start-up looking into tethering, a technology which turns all smart phones into mobile broadband routers, could harm SingTel’s revenue by eliminating the need for separate 3G modem subscriptions.

Consumers would clearly welcome the technology but will SingTel see past the immediate clash of interest and invest for its long-term gain?

Innov8 must be given the full autonomy to make an independent assessment.

The risks of venture investing are inherently higher but the payoffs can also be great.

SingTel has started on the right foot by giving its new unit an apt name. Now it must back the investment by adopting an innovative mindset as well.

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