Over the past 5 years, Telstra Ventures has invested more than $200 million in emerging technology companies around the world. Karyn Westaway sat down with Matthew Koertge, Managing Director at Telstra Ventures to get his thoughts on what he looks for when deciding whether to invest in a company.
Can you tell us a bit about Telstra Ventures?
We have been set up within Telstra to connect our business with world class innovation from lighthouse entrepreneurs. Since Telstra Ventures started in late 2011, we have reviewed over 3,500 opportunities which has resulted in 29 investments totalling more than $210 million.
This portfolio of companies comes from all over the world – Silicon Valley, Shanghai, Tel Aviv, Melbourne and more – and last year, these companies generated in excess of $1 billion in revenue, grew at more than 50 percent year on year and employed 5,000 people.
Our investments have ranged from businesses like Cohere a pioneer in wireless connectivity to Ooyala, a leading innovator in video streaming, personalization, monetization and analytics who Telstra ended up acquiring. You can see a list of our investments here.
Each of our investments is for a minority stake and is designed to give Telstra access to new technologies that we can leverage within Telstra or for our customers, or both. For example, since investing in DocuSign, a world leader in electronic records, we have successfully implemented their solutions internally within Telstra and also for a number of our enterprise customers.
How do you find the right companies to invest in?
Start-ups are being created at a faster rate than ever before around the world. There’s lots of businesses, at various stages of their development –full of creative people, passionate entrepreneurs and innovative technology, and in need of capital to take their business to the next level. But we have finite resources at our disposal, which means we have to say ‘no’ to more than 99% of entrepreneurs that we meet. I find this a difficult part of my job because we often meet amazing companies who are absolutely worth funding but don’t have the right strategic fit for Telstra.
Telstra Ventures usually invests in later stage companies which have established their leadership and are planning to scale. At Telstra Ventures we are looking for companies that:
- Are led by entrepreneurs who have the drive and ability to build a world class technology company
- Have a revolutionary technology, product or service which as a clear competitive advantage in the market
- Are targeting large, attractive and growing markets
- Have a sustainable business model with proven commercial traction
- Have a strong strategic alignment and synergy with one of Telstra’s business units.
What are some of the common pitfalls you see companies falling into?
For the later stage businesses we target, raising the necessary funds required to operate is often a difficult process. There are some key things entrepreneurs may want to consider when looking for funding:
- Be prepared – it is critical that companies have a robust business plan with all of the underlying supporting evidence, which investors will want to check in due diligence.
- Raise money on the right terms – I have seen some companies who have raised money on terms which makes them almost ‘un-investable’ in the future. Most companies have several financing rounds so it is important to get good advice and to structure the funding with this in mind.
- Target the right kind of investor – There are many different kinds of investors, ranging from friends and family, to angel and venture capital investors, to corporate investors, and more. Each investor is likely to have distinct investment criteria, so it is important to research your potential investors so you can make sure your interests are aligned and don’t waste time pursuing investors who aren’t the right fit.
What have I learnt at Telstra Ventures?
When I started working in the venture capital industry in 1997, the firms where I worked always had a pure focus on financial returns. At Telstra Ventures, we are obviously laser focussed on our returns, but there is an added dimension of investing to deliver strategic benefits to Telstra. This can be an incredibly powerful differentiator for us because not only are we investing cash in a company, Telstra can often also provide a channel to market which can generate revenue for our portfolio companies and ourselves.
In summary, what are you looking for when you are reviewing potential investments?
We are looking for world-class innovation, our portfolio companies represent global leaders in their fields.
Matthew Koertge joined Telstra in 2011 and is a Managing Director of Telstra Ventures. Matthew has worked with more than 60 global venture backed companies including a number of successful acquisitions and IPOs. Before Telstra Ventures, Matthew worked at Accede Venture Partners, Deutsche Bank Capital Partners and Macquarie Bank. Prior to the joining the venture capital industry, Matthew was a software / hardware design engineer and project manager at Fujitsu.