Bharti Airtel, the Indian telco with the largest subscriber base of 75 million, has set up a fund with a corpus of $44 Million (Rs. 200 crores) to fund innovation and entrepreneurship in the telecom sector. Some details from the FAQs:
— There’s a cap of $4.4 Million (Rs. 20 Crores) on each deal.
— The fund is open to Early Stage ventures that are registered in India
— They’re primarily targeting ventures with a commercial business model, not non-profit
— Sectors that they’re looking at – M-commerce, value added services, IP-based technology, lifestyle and location-based services
A Change In Mindset?
This move is quite ironic, and also indicative of a change in mindset. So far, operators have been squeezing startups with poor revenue shares and download “leakages”, while VC have been funding them, taking a punt that the situation will improve. Startups kept raising money, VCs kept taking a punt, operators kept benifiting from this vicious cycle. Because of this situation, VCs became more circumspect about the direct-to-consumer mobile VAS business.
Three years ago, Airtel launched “Future Factory”, intended to test the waters for new innovative services, with Centres of innovation in Kolkata, Delhi, Mumbai and Bangalore. While the initial mandate for Future Factory was to experiment with applications related to Mobile Entertainment, Commerce and rural applications, we’re learned that they’re now also looking at social applications, with the agenda of engaging the user base. No formal updates on Future Factory, though. Other operators like Reliance communications, and Tata Teleservices have developer programmes. OnMobile Global formally announced their developer program at VAS Asia in August.
Read The Fine Print
As much as this move is being lauded as “pathbreaking”, we’d sure like to take a look at the fine print. We’ve contacted Airtel corporate communications for more details on the fund, but they rarely respond, so we thought we’d highlight some possible issues that we’re looking for details/comments on:
— Lock-In Period: I wonder if there will be a particular time period, for which the service providers will have to offer services exclusively to Airtel. Airtel will thus be able to differentiate their mobile offerings from others in the business.
— Operator Conflict: Unless a product is compelling, or has garnered a large enough user base on Airtels network, I wonder if competitors like Vodafone and RCom will be open to getting on board, a company in which Airtel has equity stake. Startups in particular should be careful about this, because it means that your deployment will be limited to Airtel.
— Revenue Share Differentiation: It won’t really serve Airtel to stymy the growth of companies that they have a stake in, so will these companies get a differentiated revenue share, and more transparency in case of downloads?
— Private Treaty: The other element which is not very clear, is whether there’s real money on offer, or is Airtel merely picking up stake in exchange for some concessions. Could this be a private treaty-like business?
If there are other issues that you think might affect companies that go in for this deal, do leave a comment.