Who is investing in 'telecom innovation'?

For the hundreds of companies that have interacted at the Telecom Council of Silicon Valley the past few years, the current investment environment is new and different. We’ve heard more than one venture capitalist rationalizing why he or she wouldn’t invest in a start-up with the word “carrier” in its business plan and more than one carrier explaining why a start-up needs 18+ months of capital before the telco will invest in a new product or service. But today’s environment is different. Dare I say, better?

For decades, telcos had NIH, the Not-Invented-Here Syndrome. Culturally, we understand. Historically many great innovations came from the telcos' labs. But the dominance of those labs was lost to divestment, R&D reductions, and the emergence of faster movers from the IT and Internet worlds.

Today’s telcos understand these shifts. Innovation is happening whether they are part of it or not - and not just from big players like Google and Apple, but also from thousands of small start-ups. IP networks, open standards and disintermediation of the operators have created opportunities for new ideas, new products, new services and innovation in general. Some carriers have missed more than one boat already. Now they know to put NIH behind them or they'll suffer worse maladies as opportunities pass them by. The thirst for outside innovation has never been greater.

Carriers are taking action. Innovation adoption programs, such as those talked about at the TC3 conference, as well as developer programs, business plan competitions and even corporate VC funds are popping up in most regions. For innovators, now is the best era to partner with carriers. And though telcos still offer a languid trip through the due diligence and testing processes, they do seem to understand that working with and supporting start-ups is an important part of their innovation programs. And neither entrepreneurs nor subscribers want to wait more than a year for new products and services to hit the market. Shortening the innovation cycle is a organizational objective.

The fact that Silicon Valley is where most telecom start-ups are started each year and where most telecom venture capital is invested hasn’t changed. But what has changed is the growing number of carriers that have people on the ground here and in other innovation centers scouting for new technology, new products, and new services. They are here to be among the first to engage innovators – whether with trials, integrations or capital.

And this creates a virtuous circle. Knowing that carriers are engaged, VCs are more open to investing in telecom start-ups, as well. When VCs open their filters, more entrepreneurs and ideas tend to pop up. Based on the growth in entrepreneurs involved in the Telecom Council over the past 12 months, I’d say this is where we are now.

Even the equipment manufacturers are starting to strategize, like the operators, that to not become commoditized they need to offer services and get brand visibility from the end users. They are looking for M&A to not only enhance their hardware products, but also to offer a service platform on top.

So who is investing in telecom innovation? The entire value chain: VCs, entrepreneurs, vendors and carriers. The doors are opening, the carriers and big vendors are scouting, and the party has already started. It's not dot-com speed, but as I recall the hare didn't win that race either. Let's call the situation one of "rational exuberance."

Liz Kerton, president of the Telecom Council of Silicon Valley and principal of the marketing practice at the Kerton Group wireless consultancy, has a 20-year entrepreneurial history building and launching telecom businesses.