Telefonica launches talent incubator

Spain-based carrier Telefonica has launched a European talent incubator – Wayra –  in a move clearly designed to try and align the brand with young people and the start-up community.

José María Álvarez-Pallete, chairman and CEO of Telefónica Europe, was on hand at Wednesday’s launch event to talk about Europe’s “lost decade,” where over the past ten or so years the regional GDP has been moving backwards. He spoke of a “lost generation,” of rising unemployment and lost innovation in the face of stellar growth from the US and China, creating a ‘brain drain’ of migrating talent, while Europe struggled with an entrepreneurial deficit and an environment where people are reluctant to start new businesses.

In the vision put forward under the Wayra initiative, which is already incubating its first batch of start-ups in Latin America, Telefónica will open academies around Europe, starting in the UK in May, then moving into Dublin, Germany and the Czech Republic, catering to education and apprenticeship options for teens and upwards.

In what Álvarez-Pallete described as “the second or third largest tech incubator on Earth,” there will be opportunities for entrepreneurs to fast track their ideas to approximately 300 million customers worldwide.

As a counter point to the bleak picture he painted at the opening of Wayra Europe, Álvarez-Pallete, said that the innovation deficit was an easy problem to fix and that the incubator, or more specifically, accelerator, was actually “very easy to launch. And cheap too.”

Telefónica Digital will take a ten per cent stake in each start-up it backs, investing between €50,000 and €70,000 in the same. There would be an option to increase the stake at a later date. So far the company has had around 6,000 applications across seven countries, and aims to invest in around ten start-ups per academy.

As Dario Talmesio, principal analyst for Informa, points out, Telefónica is getting quite a good deal out of a very small investment. “In Europe I reckon they will invest no more that €6-7m to acquire shares in new business ideas; of course, then they will have all the costs of mentoring and supporting developers.

“That is a very small investment considering what they get out of it. I see the rationale of this initiative as being threefold: quite a push for their corporate social responsibility agenda, a lot of marketing in universities, and of course, access to some innovation.”

Talmesio said that the beauty of Wayra in Europe it is that it’s a cheap scale project compared to the amount of money that a telco would normally spend. It costs less than a marketing campaign promoting a new pricing plan and, if only one out of all projects that are selected works well, that will pay back the entire cost of Wayra development.

In a recent interview with telecoms.com, Paul Buchheit, partner at incubator Y Combinator explained: “You have to consider that the number one company is worth more than next 199 companies combined, while number two is worth more than next 198 combined and so on. So there are these crazy outliers and you need to be an environment where you can cultivate this. We look for that one company that can help support all the others. It’s the economics of innovation. You have to place a lot of bets. Something with high returns also has a high chance of failure. About 33 per cent of these companies just go straight to zero – they are worthless. Then there’s another third that are in the middle. You maybe get your money back or double your money and then you get the rest which give you a good return.”

However, it remains to be seen how appealing Telefónica’s play will be for young and talented innovators to stick to, when there are very alluring alternatives such as Facebook out there. “It’s a steep slope for telcos but it’s good to see that Telefonica is addressing a real issue,” Talmesio said.