Vivo, the commercial brand of Telefônica Brasil (part of the telecom conglomerate Telefónica Group), recently kicked off Vivo Ventures, a BRL 320 million Corporate Venture Capital fund to invest in Brazilian startups operating in areas such as entertainment, marketplace, finance, smart home, education, and healthcare.
With this capital on hand, Vivo Ventures is one of the largest CVC funds in Brazil and plans to invest in growth-stage startups, in Series A or B rounds and signing average checks of BRL 20 million, taking up to 20% of the startup‘s equity. The idea is to build a portfolio of 12 to 20 startups in the next five years.
This is not Vivo’s first effort to get closer to the startup ecosystem in Brazil. Telefonica Group is the name behind Wayra, an innovation hub present in many countries. But unlike Vivo Ventures, Wayra usually invests in pre-Seed and Seed rounds in businesses that have synergies with the company’s business – mainly in entertainment, artificial intelligence, IoT, Big Data, edtechs, and fintechs. In 2021, about BRL 70 million were generated in business between Vivo and the startups from Wayra Brazil‘s portfolio.
Both initiatives have to do with Vivo’s strategy of investing in new growth avenues and positioning itself increasingly as something more than a telco, but rather as a digital hub with a diverse portfolio of products and services. Hence the search for startups operating in areas that, although seems to be far from a telco’s core business, are key sectors for the company’s goal of taking part in other business ecosystems, either through its own business or through partnering with leading brands in their areas.
As part of this strategy, in recent years Vivo has added to its offer everything from financial products, such as a digital account (Vivo Pay) and a personal loan (Vivo Money), to health-oriented solutions, such as a meditation app (Atma) or a health marketplace (Vida V.). There is also a joint venture with edtech Ânima; a marketplace to buy all kinds of products (Vivo Shopping); and partnerships with video and music streaming platforms.
LABS talked to Rodrigo Gruner, Innovation and New Businesses director at Vivo, about Vivo Ventures and the company’s strategy. Here are the main parts of the interview:
Vivo Ventures’ role in Vivo’s growth strategy
“To accelerate and strengthen our business, we needed vehicles to push, levers. That is where mergers and acquisitions, strategic partnerships and joint ventures come in. Vivo Ventures is one of these levers to reinforce our approach to the open innovation ecosystem.
We have Wayra, Vivo’s innovation hub with more than ten years, but it has a different investment thesis than CVC, a low ticket one. So we think that Brazil has many startups that would be good partners for these other growth avenues of Vivo, but they are startups that are at another stage of the journey. Vivo Ventures comes to complement Wayra’s thesis, with a higher ticket.
In this regard, our CVC is another step in an evolutionary process that has been going on for many years. When we talk about the innovation model, we get to the “where are we going?” We are well-positioned in telecom, but this is a market that is growing at lower rates worldwide. However, it is a model that has a lot of opportunities for new digital businesses.
Super app or ecosystem?
“Our vision is not a one-product vision. We are not going to have a super app. Some businesses manage or need it that way, banks do that a lot, they start with their core business and add new services at the same app.
We are not going to put everything on a single journey, even for technical reasons, because it is not feasible. You see, Vivo works with connectivity, has a high-speed broadband business, sells pay-TV, and has an app version of the TV content. If we put the linear channels into the app, this app would be so heavy, slow, and hard to manage that it wouldn’t justify it. The same is true for other Vivo businesses, does it make sense to put the telemedicine service in the Vivo app? No.
Our ecosystem vision is that each business has to have its own journey and deliver its own value to the customer. We are going to create connections between these businesses that make this ecosystem tangible for the customer. We will do this through integrated product journeys that have adherences, for example, with Vivo Pay within Vivo app. Some businesses enable deeper integration, others less so.
Vivo Ventures’ investment thesis
“Most importantly, we are looking for businesses that can be leveraged by Vivo’s assets. The match with Vivo’s strategy has a lot of relevance to our thesis. It is a challenge because we are going to enter very competitive areas from a venture capital perspective. But the focus of an institutional fund is not necessarily the same as the focus of a CVC, precisely because the corporate has the company’s strategy as a key factor. We also plan to work together with institutional funds, as a follower. And we are only looking for startups in Brazil.
Last three years, we have had a lot of venture capital liquidity, and a lot of money flowed into VC funds. We are still in a moment of great flow of venture capital in Brazil, there are many opportunities in the market. So when someone like us, a CVC, comes in, we also have to pitch to the founder.