Corporate VC: Why Orange Ventures Is Rebooting
President and Managing Partner Jérôme Berger discusses the decision to spin out the venture firm.
Orange has been investing in startups for almost 20 years. But the telecom giant got really serious about things in 2015 when it launched Orange Digital Ventures, a classic corporate VC that remained under the wing of its parent.
Now, this fledgling has left the nest. Orange announced last month that it had spun out its venture capital operation to a standalone venture capital firm with the slimmed-down name of Orange Ventures. The independent firm has €350 million to invest across 3 funds, even as it will continue to manage the €100 million in assets that its predecessor ODV had placed in portfolio companies.
According to Orange Ventures president and managing partner Jérôme Berger, the decision reflected the growing ambitions and the growing opportunities Orange sees for what is now one of Europe’s largest corporate VCs.
But to seize those chances, the fund needed to move as quickly and decisively as classic VC funds. That meant having more autonomy to pursue its digital transformation agenda.
The differences between the former ODV and the new OV offer some insight into how corporate venture can be both powerful and limiting. And how circumstances are forcing corporate giants to think differently and accept bigger risks.
To understand that, it’s worth starting with how ODV functioned. Its goal was both to make healthy returns and find startups that offered some synergy with Orange, though not exclusively. Berger estimated that about 50% of ODV’s investments offered some service that also could lead to a partnership with an Orange business unit.
From its 2015 founding, ODV invested in startups at the earliest stages in four sectors: connectivity, cybersecurity, the digital enterprise, and financial services. That offers a lot of terrain to cover. ODV over its lifetime made about 25 investments, according to Berger. Those included U.K.-based fintech Monzo which has raised more than €350 million. ODV participated in a 2016 and 2018 round.
That’s fine, as far it went. But decision making could be cumbersome. To make an investment, ODV had to get approval from an internal investment committee that included executives working in related sectors. Part of the value pitch to startups was also the potential to leverage Orange’s assets such as its marketing reach, customer base, and international presence — if they could find the right synergy with other existing Orange teams.
But here, the process was also limiting. Berger said the role of ODV was often to facilitate introductions. Whatever happened after that was between the startup and the internal Orange team.
A Brand New Day
Orange Ventures is designed to address some of the shortcomings of the ODV model.
First, they are now a fully independent firm and able to make investment decisions without consulting Orange. As such, the firm has brought in an extended lineup of professional venture capitalists. There are now 20 people on the Orange Ventures team.
With a bigger fund in hand, the new firm will move away from early-stage to focus and Series B and C rounds, with the ability to invest up to €20 million. This reflected a desire to have a bigger impact on digital transformation, a goal that was part of Orange’s 5-year strategic plan released last August called Engage 2025.
Part of the mission is also to fix the way startups work with Orange so the process is more productive for both sides. It’s still not an obligation that a startup addresses a particular need of Orange. But by backing more mature companies that have developed products with some traction, Berger believes the opportunities will be easier to identify.
In those cases, the firm will have a structured system for connecting startups with internal teams. That will include deadlines to reach defined milestones with constant monitoring by an Orange Ventures team member.
“We will set very explicit new goals in terms of financial performance, and then there is monitoring for the synergies and the common strategic value that we bring,” Berger said. “We believe that having companies that are a bit more mature and can more easily handle working with a large company like Orange will be more effective.”
A Global View
Orange Ventures is also reshaping the way it works internationally. The firm has offices in Paris and Dakar. And it’s leaning on its vast network of local operators to help spot interesting startups.
From Orange Silicon Valley, the VC firm wants help finding U.S.-based later-stage startups that are looking for help going into new territories such as Europe, the Middle East, and Africa.
The firm will take a different approach to the Middle East and Africa, where it will continue to focus on early-stage investments. That includes a seed fund for the African and Middle Eastern countries where Orange operates. Those startups could be eligible for follow-on funding from the main Orange Venture’s fund.
“Our ambition with the seed funding is to finance 100 startups by 2025,” Berger said. “Our idea is to boost the development of the digital ecosystems in the countries where Orange is present.”
Amid all the structural changes, Orange Ventures is also expanding its investing horizons by targeting more consumer-based startups and e-health to its list of targets. The topic of e-health had been on the radar of ODV before the pandemic even if it never officially made the move into that sector.
While Orange Ventures will be a newcomer to e-health, it’s hoping to leverage existing Orange initiatives such as the Orange Healthcare business unit, and the partnership between Orange Business and Marseille-based startup Enovacom. All these efforts are focused on the digital transformation of healthcare.
“We have thought for a long time that there was a lot of potential in that area,” Berger said. “And of course everything that has happened in 2020 showed that the digital nature of the way we approach health can be very, very promising.”
Finally, just over the horizon, Berger said Orange Ventures will launch an initiative focused on sustainability, although the timeline hasn’t been defined yet.
With all of these changes, Orange Ventures now faces even bigger expectations. Berger is confident the firm has the right structure now and enough assets to allow the team to compete for deals against top VC funds.
“We needed to be at the very best standards in terms of execution compared to the regular venture funds,” Berger said. “In order to do that, we felt we needed to have an autonomous process of investment decisions and to function as a regular VC fund.”
In other news…
Bpifrance announced a new €100 million fintech investment fund. The money will be distributed through its Digital Venture and Large Venture funds and will target startups developing financial solutions that can include banking services, insurance, blockchain projects, and risk management. These can be B2B or B2C.
The big picture: France’s fintech sector had an outstanding year in 2020. Bpifrance wants to keep that momentum going. This money will be available for the very earliest stage startups, an important step as the VC trend in 2020 was more money for later-stage companies but a slowdown in early-stage funding. That still leaves the question of how much space there is to solve fintech problems on a scale that will create the opportunity to build global champions like Stripe or Transferwise, or whether the focus is really finding interesting niches.
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