As we reported late last year, although operators are keen to talk the talk about being innovative, cold hard evidence of it is thin on the ground.

But while signing partnership agreements with the likes of Netflix and Twitter are flavour of the month when it comes to crowbarring innovative services into their offerings, operators have not totally given up on finding the next big thing themselves.

In particular, start-up accelerators and venture capital arms are growing and maturing.

Ovum analyst Steven Hartley tells European Communications: “We expect venture capital arms to become more important innovation channels. It puts your destiny in your own hands, makes your capital work for you in a better way and increases your chances of success.”

One of the key questions is whether operators are looking to find the next Uber or Snapchat to invest in, or trying to find something to offer their existing customer base.

Says Hartley: “I’m not convinced telcos can be an investor and look for services to boost their portfolios… it’s contradictory.”

Typically, some of continent’s biggest operators are trying to do both.

Last week, Orange launched Orange Digital Ventures with a €20 million fund to find start-ups in areas including big data, the IoT, payments and security.

It joins a number of larger VC funds Orange invests in with other companies and start-up accelerator Orange Fab as part of the operator’s “Open Innovation” strategy.

Orange said ODV would make capital investments via minority holdings initially, but would also look to “work alongside them to transform talented entrepreneurs into key players in their chosen markets and… benefit Orange and its customers.”

That could be enough to set alarm bells ringing in the minds of the best entrepreneurs.

Nathalie Boulanger, Director of Orange Ecosystems & Start-Ups, disagrees. She cites Family Place – a private social network designed for families – as an example that the system works. Discovered by Orange Fab, it launched in France in April last year.

Orange Fab is active in eight countries and provides up to €15,000 in funding for three months, as well as two days where entrepreneurs get to demo their product to potential investors.

Roughly half of the start-ups that pass through the accelerator continue to work Orange after the three months are up, according to Boulanger.

Telefónica has a similar structure to Orange, which goes under the banner of Open Future and stretches from offering crowdworking spaces at one end to sophisticated venture capital funds at the other.

Ana Segurado is CEO of both Open Future and accelerator Wayra. She says it’s true that the operator has a “double objective” of investing and providing services to Telefónica opcos.

Wayra was at the vanguard of the telecoms start-up scene, having launched in 2011.

Segurado says: “[Wayra] is an accelerator inside a telco so the final objective is to find things that we can offer to our clients.”

As stated on its website, its mission seems pretty clear: “Our programme will give you funding up to $50,000, an incredible place to work, mentors, business partners, access to a global network of talent and the opportunity to reach millions of Telefónica customers.”

To date it has invested $25 million and has a portfolio of 435 companies, of which 80 are working with Telefónica to introduce relevant products and services.

Both Segurado and Boulanger agree that success is dependent on the accelerators, investment funds and opcos not working in a vacuum.

Telefónica’s Segurado says Wayra is now “much closer” to Telefónica’s other investment vehicles following a restructure that led to Open Future.

“We are receiving better projects now and have a better deal flow,” she explains.

According to Orange’s Boulanger, success is dependent on staff working “very closely” with the operator’s opcos.

“Executives from opcos are invited to an initial selection process. If they are interested [in a product/service] they are invited to be on the final jury,” she says.

“It’s all about [opco execs] having a willingness to cooperate if it’s going to work. But we also know that we are not relevant to work with each and every startup.”

In a tacit acknowledgment it couldn’t succeed on its own, the operator announced last year that Orange Fab would be working more closely with Deutsche Telekom’s accelerator hub:raum.

The combined footprint covers most of Europe apart from Italy.

Says Boulanger: “The accelerator market is very competitive but I look at is as more cooperative. We are talking with all the different accelerators… it makes sense to work together.”

For example, Orange and Telefónica are working together at a European level, alongside Telecom Italia and the European Investment Bank amongst others, as part of the StartUp Europe Partnership, which aims to support the growth and sustainability of startups.

Despite this pervading sense of “coopetition”, Segurado admits success is still hard to come by.

“One of the most important lessons I have learned is that not all of the Wayra companies are prepared to work with Telefónica. Now we are more selective,” she says.

The problem with getting selective, says Ovum’s Hartley, is that the nature of the venture capital beast means you need to sow a lot of seeds to reap a decent harvest.

Further, the analyst thinks operators are still wedded to the idea of inhouse innovation departments. He says: “I’m pretty sure most of their resources are going into this more traditional route.”

Telenor incorporates an “incubator environment” into its Telenor Digital business.

Entrepreneur Svein Willassen joined TD in 2010 and now heads up appear.in, a webRTC-based video conferencing tool. It is one of four products that have made it from the prototype stage to become a Telenor Digital “brand”.

Willassen says the aim is for the product to be live in one of Telenor’s European markets later this year. But he admits it could have been killed at birth: “We persuaded TD it was a project that had traction but we were rebellious and did not ask for permission to release it.

“Asking permission is a death sentence and I don’t think we would have got it. Telcos need to understand that the start up scene is very different to the telco environment and not get in their way.”

Nevertheless, Willassen does not regret joining TD over, for example, an established tech VC fund.

He says: “There are pros and cons to both. We might have had a nicer office but I would have spent more time keeping investors happy.

“We want to leverage Telenor’s distribution and I think we have more freedom here, but I have to learn the telco culture so as not to offend anyone!”

The telcos cannot be accused of lacking effort, but their desire to do everything – from accelerators to VC funds and much in between – risks muddying the pitch.

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