Show Me the (Mobile) Money

Every year of the past decade has been declared, in some capacity, the Year of Mobile. That includes this year, which is when smartphone penetration is expected to surpass 50 percent. (In 2010, comScore pegged U.S. smartphone ownership at 27 percent.) Rabid excitement for mobile media has managed to outpace the sector’s growth, a fact reflected by increasingly large cash infusions from venture capitalists. In the first quarter of this year, 81 companies raised $616 million; that’s almost double the amount raised in Q4 of 2010 and triple the amount in Q3 2010, according to VC database CB Insights. “There’s a lot of capital chasing only a handful of interesting and compelling companies,” says Pratik Patel, vp at investment bank Gridley & Co. The limited range of prospects leads to an inevitable result: “The valuation goes north very quickly,” Patel adds. High premiums would normally turn off value-seeking venture investors, but the ends justify the means when strategic players like Google, Apple, and eBay are eagerly buying their way into mobile technology, regardless of cost. That makes for some juicy exits. Following sales of companies like AdMob (to Google), Where Inc. (to eBay), and Quattro Wireless (to Apple, where it became iAd), investors are hot, in particular, for mobile marketing analytics and platform plays. They’re also closely watching “m-commerce,” and payments companies like Square, which develop technology to make it easier to shop with mobile devices. Less enticing? Content plays, which have been limited thus far to gaming. “The interest is there, but VCs fear it’s hard to repeat good content in the form of games,” Patel says. Despite market bullishness, several of the largest recent deals have been in content and gaming: Foursquare, mobile Q&A service Cha-Cha, and game developer TinyCo each raised outsized rounds in the past year. While most venture players fold mobile plays into their traditional funds, the app world has spawned a few highly specific vehicles. Kleiner Perkins Caufield & Byers recently doubled the size of its Apple-focused iFund, and DCM last month unveiled its Android-focused A-Fund. The recent surge in Android adoption creates a tricky situation for the iFund: Kleiner Perkins admits that most of its iFund companies aren’t actually Apple-specific, since they also develop apps for Google’s Android operating system. Mobile Venture Capital Firm Headquarters, Latest Fund, Amount Raised, and Vintage Focus Notable Deals Accel Partners Palo Alto, Calif. Accel Growth Fund, Accel London III $480 million, $525 million 2008 Accel’s investments span a variety of digital-related verticals including mobile in Europe, Asia, and the U.S. The Cloud, iPass, AdMob, Go Networks Comcast Interactive Capital Philadelphia $500 million under management Invests in digital media and communications technologies including platforms and ad networks. JiWire, 4INFO, Greystripe, Bubble Motion DCM Menlo Park, Calif. A-Fund $100 million 2011 Backed by Japanese mobile carrier KDDI, mobile-gaming company Gree, and Chinese Internet company Tencent, the A-Fund will invest in companies developing software related to Google’s Android operating system. The fund launched last month and has not yet announced a deal. Kleiner Perkins Caufield & Byers Menlo Park, Calif. iFund $200 million 2008 Makes stage-agnotistic investments in location-based services, social networking, mobile commerce, communication, and entertainment companies serving the iPhone, iPad, and iTouch. Zynga, Twitter, Pelago, Shopkick New Enterprise Associates Menlo Park, Calif. NEA 13 $2.48 billion 2010 Within its information technology domain, NEA, the world’s largest venture firm, focuses on early stage and growth equity investments. Brightkite, Loopt, Millennial Media, Motricity Nexit Ventures Helsinki, Finland Nexit Infocom II $122 million 2008 Nexit Ventures backs Nordic and U.S.-based mobile and wireless communication companies, exchanging best practices between the regions. Brightkite, Bitfone Nokia Growth Partners Menlo Park/Helsinki $250 million under management Fully backed by Nokia, invests exclusively in growth-stage mobile companies across subsector. Kyte, Swype, Rocket Fuel Research In Motion Toronto BlackBerry Partners Fund II $150 million 2011 Working with Research In Motion, Thomson Reuters, and Royal Bank of Canada, the fund invests in device, platform, and stage-agnostic mobile computing companies. Digby, SocialDeck, Doppelgames, LocalResponse, Payfone Sequoia Capital Menlo Park, Calif. Sequoia Capital 2010 $1.35 billion 2011 Part of a broader investment mandate, Sequoia Capital’s mobile practice focuses on application, communication, device, gaming, and monetization startups across stages in the U.S., China, India, and Israel. AdMob, Bump, Jawbone T-Venture Bonn, Germany T-Mobile Venture Fund $142 million (2011 est.) NA Acting as the venture arm of Deutsche Telekom and Creathor Venture, the fund invests in infrastructure companies and application makers with the intention of supporting T-Mobile’s supplier relationships. BelAir Networks, Mobile Commerce, Netbiscuits

Performance Marketing

Show Me the (Mobile) Money

Venture capitalists are spending big to get the hottest companies

Erin Griffith

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Erin Griffith