The booming sales of smartphones such as the iPhone and the growing popularity of mobile app stores has prompted a renaissance in the mobile industry and of course a big surge in startup activity. It’s reflected in the growing investments in mobile companies based in the San Francisco Bay Area, according to a report released by industry group Mobile Monday Silicon Valley. The group is going to discuss its findings (posted below) at an event later today on Monday.
The group points out that in 2000, only 14 companies received venture capital but in 2008, that number had grown to 90. There now are over 160 mobile companies in Silicon Valley. I take issue with them including companies such as Ribbit and Jaxtr, but still, the total number of mobile startups is going up — no question about it. And this data doesn’t include information about startups in, say, New York or Seattle.
According to the data collected by the group, nearly $1.17 billion was invested by venture capitalists in 2007, a number which was cut to $851 million in 2008. While the total dollar amount went down, the total number of companies that received VC dollars went up, to 90 from 75 in 2007. The downward trend in mobile-focused investments has continued through the first half of 2009, with only $354.7 million invested. (Related post: What Happened in Mobile in Q2 2009. You can also sign up with GigaOM Pro to get the latest research on the mobile Internet for $79 a year.)
Last year there were three major deals adding up to over $600 million. These included Microsoft’s purchase of Sidekick-maker Danger for $500 million. In the first half of 2009, there were quite a few acquisitions, though many of them were small, such as Amazon’s acquisition of SnapTell or RIM’s acquisition of Dash Navigation for $8.3 million. I wonder if the current iTunes App Store fiasco is going to dampen investments in the mobile sector further. Thoughts?
When we were pitching last summer, the message from Sand Hill road was very clear: “Nobody has made money from phone software yet, come back with revenue”. It didn’t feel like there was any shared risk on offer. We went to Europe and heard a very different story. There was and is still strong belief in mobile over there.
I’ve recently been demoing to a few VCs I know and the message is very different – good teams with delivery records and a good product and now in demand. Mobile is in vogue again. Still, all the really great ideas have already got money in Europe 😉
I think the risk for Silicon valley is that despite Apple’s success there is still not a good understanding of mobile development in the infrastructure such as the VCs (or I would risk, in the engineering culture). Europe is still leading the way. Bay Area developers (rather than Silicon Valley) will no doubt do well in mobile but it will be by building upon its previous web success that by actually leading in mobile. Luckily, the market is big enough that there is a prize for second place.
I have heard again and again that Asia and Europe are so far ahead of us in the shift to mobile — and how it will apply to developing countries that don’t have any other phone service — that we can’t even catch up. Whoever makes apps that create browser-type experience for the people in Africa and Asia and South American with “ordinary” phones will win.