Communications, Media & Entertainment & New Media - Industry News
| Venture caps turned on by off-deck: 2006-2009 mobile startup database |  |
November 03, 2009 6:20 PM ET
By John Fletcher
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Smart phones, app stores, Twitter and selling direct to the consumer have the venture capital community abuzz recently, making the mobile startups of 2006, some of which raised funds with a business model that sold products to carriers, comparatively archaic. Some funds have been created to focus solely on high-end handset apps. Kleiner Perkins Caufield & Byers launched the $100 million iFund in spring 2008 to focus solely on Apple Inc.'s iPhone. By mid-October, the fund invested about half its money into at least six companies, including game companies ngmoco and Booyah. Research In Motion, Thomson Reuters Corp. and RBC launched a similar $150 million fund at about the same time but with a focus on Research In Motion's BlackBerry apps. By mid-October, there were 12 instances of financing for iPhone App Store-related companies, up from just one in 2007. Combined, these startups have raised more than $36 million so far in 2009. 
Twitter sparked its own subset of startups that use its technology for their respective services. One example is "social customer relationship management" CoTweet, which enables in-company business tweets. It can also be used to keep in touch with customers and directly answer their questions by searching tweets by brand name. StockTwits aggregates stock-related Twitter messages and can also search for tweets by ticker name, offering instant access to rumors, news and trading trends. URL shortener bit.ly raised $2 million in March to help fit full Web addresses within the 140 characters to which Twitter is constrained. Twitter itself raised the most funding since 2006, after Clearwire Corp.'s $900 million Intel investment, selling $158.7 million of venture equity. Rumored Twitter acquisitions by Google Inc. and Facebook are reportedly more than $500 million and would yield a robust return for Twitter investors, but that pales in comparison to the company's most recent round in September that valued the company at more than $1 billion despite its paltry revenue. Other familiar companies that have attracted a large chunk of change invested over the years include Motricity, MobiTV, Handango, ChaCha and Jumptap. 
While messaging and high-end handset businesses have received a fair amount of attention from Sand Hill Road recently, in 2006 the focus was different. Our database (see attached media sector report) shows that 16 instances of funding were made for business-to-business software companies such as Motricity in 2006, but only nine such instances have been recorded so far this year, and four of these are focused on the iPhone. 
A different category declining by investment instances includes aggregators such as Thumbplay and MobiTV. The move away from business-to-business software developers and aggregators reflects the overall shift the U.S. wireless business has undergone over the past several years, thanks largely to smart phones and their ability to search the open Web and not just the walled-garden wireless app protocol. Funding today is increasingly going to direct-to-consumer companies such as Smule, which raised $3.9 million in February from Granite Ventures. The company is the developer of the popular iPhone apps Ocarina and I Am T-Pain. But the mobile category most likely to raise funds from 2006 to 2009 has been advertising startups, with 46 of the 390 financing instances we tracked going to companies such as Amobee, AdMob, Millennial Media, JumpTap and AdWhirl, which was recently acquired by AdMob. The next largest category is messaging, with examples ranging from middleware infrastructure providers such as mBlox to a more recent boom in the category thanks to Twitter. Despite a lack of profits in mobile video, mobile startups focused on video were the fifth-highest by financing instances over the past few years, while just 13 have gone to mobile game companies despite their more attractive economics. Only six financing instances have gone to companies focusing on mobile analytics, such as Flurry and CarrierIQ. 
Overall, we estimate mobile startups raised more than $5 billion in venture funding since 2006, and the recession has had an impact: Average amount invested per round decreased from $14.2 million in 2006 to $8.5 million so far this year. 
The most active venture capital firms in mobile include familiar names such as Sequoia Capital, Accel Partners and Norwest Venture Partners, with some wireless and technology companies also active, including Motorola, Qualcomm Inc., BlackBerry and Intel. NBC Universal Inc.'s startup arm, Peacock Equity, and Walt Disney Co.'s Steamboat Ventures have also staked some mobile claims, with both investing in mobile game and advertising startup Greystripe. 
Wireless Investor is a regular feature from SNL Kagan, offering exclusive research and commentary. | 
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