Cybersecurity is one of the three main pillars of Telefónica's brand new technology division and one of the 'white hopes' of the business diversification strategy that started several years ago. And it is the most advanced in its separation under the new unit. Now, the Spanish operator seeks to unify and also promote investment in companies specialized in this area. The first has already been accomplished: it has merged the activity of its accelerator Wayra and Telefónica Innovation Ventures, its general investment arm, in this market. And now he is studying opening the capital to other institutional investors.
Wayra has been responsible for the acceleration and investment of technology companies in very early stages. For its part, Telefónica Innovation Ventures is the tool to invest in more advanced firms and in funds of venture capital managers that, in turn, also do the same. To try to 'verticalize' all this work, the operator has unified the work of both in the area of cybersecurity. It has been made under the figure of an initial vehicle that does not have the usual background shape and that has the name of Telefónica Tech Ventures.
ElevenPaths, the telecom company in this sector, and executives such as Chema Alonso, responsible for the group's digital consumption, or Guenia Gawendo, director of Telefónica Innovation Ventures, will play a relevant role in the management. It was created with a portfolio of nine companies selected from the portfolios of the accelerator and Innovation Ventures and has the objective of investing in up to fifteen others both at early ages and in more mature ones in three years. To land in the shareholding and follow up on the different capital increases necessary in each of the projects, it will mobilize tens of millions of euros.
Given this expectation, the group chaired by José María Álvarez-Pallete wants to test the appetite of other partners. Among those potential participants in the fund would be other institutional managers, specialized in the cybersecurity area, both public and private, as well as Spanish or international 'family offices'. There has not yet been any incorporation and there is no deadline for it, nor an investment objective, since we want to wait and see how far that appetite goes. This year alone, according to various market estimates, companies focused on internet security are expected to attract a global investment of more than 8 billion euros.
As in the case of banking with the fintech sector, for which the main entities have specialized funds, Telefónica seeks to achieve two objectives. On the one hand, finding a clear return on investment in an especially hot sector with especially high valuations given the growth of the business. On the other, being in contact with the ecosystem, in order to analyze market trends or even enrich its product portfolio with commercial agreements with these firms.
Telefónica now seeks to be what is known as LP (limited partner) for its own fund when for years it has worked as such in different national and international risk capital managers. Innovation Ventures today has a portfolio of 10 companies, including 4iQ, the cybersecurity firm founded by the creator of Alienvault (sold to AT&T for 600 million euros in 2018). But, at the same time, he is or has been a shareholder in funds of three Spanish fund managers (Kibo Ventures, Active Venture and Caixa Capital Risc) and of three other Latin American companies (Invest Tech, Axon and Scale Capital), all of them in the divestment phase. In the last year it has entered the capital of another three, but it has focused on the international market, outside of Spain: one in California (USA), another in Israel and the third in Sao Paulo (Brazil).
This investment portfolio is accounted for by the company at just over 102 million euros, with a revaluation of 20% in 2019, according to the latest numbers made public by the company before the Mercantile Registry. Of these, participation in the funds represents almost 60% of the total. After the different divestments carried out during that year, the company had income of 2.4 million, although it finally suffered losses of just over 10 million due to the valuation cuts of some of these assets. Among the latter is not yet found that of Scytl, of which it had 1.56% of the shares and which has been sold a few weeks ago for a demolition price recently to Service Point after the bankruptcy.
The analysis of the investment appetite in this vehicle will also be a good thermometer for what the operator hopes to do at Telefónica Tech. This division is already well advanced in all formal separation works, while it continues to analyze the entry of external partners. The one that is most advanced is Cybersecurity. No investment has yet been closed. To try to facilitate this landing, the teleco has opened to admit shareholders in each of the subsidiaries and not so much in the entire division, as La Información advanced.
The cybersecurity business at Telefónica has maintained, like 'big data' and cloud, double-digit growth in Spain. In the first nine months, revenues amounted to 314 million euros, driven by the banking, insurance or energy sectors. To try to strengthen itself in this last quarter, it has formalized two acquisitions: Govertis, a consultancy specializing in compliance that was one of its invested companies, and iHacklabs, focused on training in this specialty.