Carriers are courting startups more actively than ever as they seek new ways to innovate, differentiate, and disrupt, all while managing costs and network traffic more efficiently. AT&T, Verizon Wireless, and Sprint have all opened offices in Silicon Valley, and have committed top talent to finding and funding promising startups. International operators including Telefonica, France Telecom, and Swisscom are also looking to startups for new ways to leverage their mobile networks.
Success stories may begin with telecom investors in Silicon Valley, but they often end up spanning geographies and spanning the wireless ecosystem as well. AT&T says its investment in Israel’s Intucell has paid off in the form of fewer dropped calls thanks to Intucell’s self-organizing network software. In order to integrate that software into its network, AT&T connected Intucell with equipment vendors including Ericsson and Cisco, which ended up buying the company for $475 million. France Telecom’s investment in Lookout, a San Francisco mobile security startup, helped the company prove its concept on consumer devices and then win a contract to provide enterprise security solutions for Samsung.
But not every story has such a happy ending. Carriers are the first to admit that the interaction between their own corporate cultures and those of young startups can be tricky. “Startups used to say that working with a carrier is like dancing with an elephant, if you’re the mouse,” said AT&T’s Mark Nagel, executive director of marketing at the AT&T Foundry, which works with startups.
“We can kill a company and we have to be so conscious of it,” said Tracy Isacke, director of business developmet and investment at Telefonica. Isacke and Nagel were speakers at the Telecom Council‘s TC3 event this week, a networking opportunity for carriers and startups.
Isacke believes carriers can offer startups the fairest treatment when they tailor their interaction based on the phase of the business relationship. She divides that relationship into three stages: discovery, disruption and delivery. Startups should maintain significant flexibility during the first two stages, but if the collaboration reaches the delivery phase, the carrier needs control.
First Steps
“Dancing with an elephant,” is an analogy that Nagel and Isacke hope is becoming less and less apt to the carrier/startup relationship. But of course the vast majority of hopeful startups never even get invited to the dance at all. At TC3, Nagel and Isacke joined representatives from China Mobile, Win Telecom and Swisscom to discuss how startups can get a foot in the door. They compared the process of meeting with startups to “speed dating,” with startups having just a few moments to show how they can address a carrier need.
“If you can integrate your solution with a carrier’s existing solution it’s more likely to succeed,” said China Mobile director Daniel Zhao. Isacke added that startups that address one of Telefonica’s vertical markets often get attention, but that in the end timing is most critical. She said relationships start “when the need that you [the carrier] have is joined with the offering that the startup has.”
But there are very few second dates and even fewer prospects invited home to meet Mom and Dad (corporate decision makers.) Isacke said that just as young couples often don’t meet the parents until they are serious, she does not bring startups to corporate until the relationship is well advanced. “Only make them meet Mom and Dad when you think you can make that successful relationship,” she advises anyone trying to shepherd startups through a large carrier.
Convincing Corporate
“You need to convince your business unit you can work with them,” said Stephane Allaire of Win Telecom. “If they already have a U.S. carrier customer it helps,” he added. Ursula Oesterle, vice president of innovation at Swisscom, added that it becomes trickier as more business units get involved. “In one moment it may be going great with one business unit, but another business unit may have a change of management and it may not be a good time to work with them,” she said.
Zhao said it is very hard for the huge state-controlled China Mobile to work with a startup. Nonetheless, the company’s Silicon Valley representative, Daniel Zhao, was able to introduce six promising young companies to corporate last year.
At the other end of the spectrum, Swisscom said that as a smaller carrier, it can and does work with early stage startups. “We are very keen to get in early and learn along the way,” said Oesterle. “What we underestimate is the amount of time and resources involved.”
Time and resources are often just what startups need to bring their technologies to market. Carriers often have the resources, but time can be scarce, especially when so many startups are competing for just a few spots on the carriers’ dance cards.
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