VC investment in mobile at an all-time high

Venture-capital investments in the mobile sector are soaring, led by media and applications, commerce and payments and healthcare, according to a new report from Rutberg & Co.
VC investment in mobile is at the largest level ($3 billion in the first half of the year) since the company initiated coverage of the sector in 2001. Indeed, mobile represents 42% of overall tech venture capital, according to the company’s report on VC investment and merger-and-acquisition activity during the first half of 2011.
Interestingly, seven of the 18 most active investors are new to the mobile space, said Rajeev Chand, managing director and head of research at Rutberg. Furthermore, two of the top five capital investments in mobile in the first half of the year did not come from the telecom sector. Both of these facts point to the broader VC community investing in mobile. Mobile VC investment traditionally has been centered on infrastructure, handsets and integrated services, but that no longer is true, Chand commented. “Anybody can do anything with mobile. It’s a strong benefit and a strong negative.”
Group messaging is an example of the shift in mobile VC funding, Chand said. Traditionally that sector would have been the domain of wireless operators, but is more distributed today, noting GOGII received $15 million in VC and Mindless Dribble received less than $1 million. “What used to be the domain of mobile operators is now a new opportunity for entrepreneurs.”
A total of $3 billion in venture capital has been invested during the first half of the year in 358 deals. Media and applications accounted for $960 million of that amount. The commerce and payments space, which drew $300 million in investments, and the healthcare space, which saw $165 million in VC funding, experienced the greatest growth. Two years ago, neither of those sectors were large enough to be considered as a separate segment, Chand said. In contrast, VC investment in infrastructure was down 38% from the previous six months to $332 million in the first half of 2011.
“We are in the beginning of a 10-year cycle in which mobile computing will reshape the way consumers live and businesses operate,” Rutberg said. “PC Internet is a ‘dress rehearsal’ for what will come with mobile, and the unforeseen applications in mobile computing will exceed those from the Internet thus far.”
The most active investors in mobile during the first six months of the year were Sequoia Capital, Kleiner Perkins, Intel Capital, NEA, and DFJ. Canadian wireless operator Mobilicity saw the single largest investment in the period, with $214 million in funding. Plastic Logic (device sector), which received $200 million in funding, was next, followed by Tabula (semiconductor sector) with $108 million and Square (mobile commerce and payments) with $100 million.
Deals of all sizes are getting done and getting done quickly, Chand said. Venture capitalists were frustrated with the mobile segment the last few years, but that changed when mobile marketing company AdMob was acquired by Google Inc. (GOOG) in 2010 for a reported $750 million.
Strategic investors continue to be very active in mobile and were involved in 19.6% of mobile deals in the first half the year, Rutberg noted. The most active strategic investors were Intel Capital, BlackBerry Partner Funds, Comcast Interactive Capital and T-Ventures (Deutsche Telekom.)
M&A activity has increased during the last 18 months, with 222 transactions announced in mobile, up 73% from a year ago. The most active aquirers were AT&T Inc. (T),Facebook, Google, Intel Corp. (INTC), Motorola Mobility Holdings (MMI) , Qualcomm Inc. (QCOM), Research In Motion Ltd. (RIMM)and Zynga.