Venture capitalists are pouring more money into mobile startups, with seed funding showing the strongest growth. According to venture capital database CB Insights, 42% of venture capital deals involving mobile companies were initial investments, or seed funding, during the third quarter. Overall, just 31% of third quarter VC deals across all industries were seed investments.
Boutique investment bank Rutberg & Company has been tracking venture capital flows in the mobile ecosystem for more than a decade. According to Rutberg, VC investment in mobile peaked in 2006 at $6.4 billion, and is on track to match or exceed that amount this year. But the mix is very different now. In 2006, less than 25% of mobile deals were under $5 million. Now, 60% of investments are for less than $5 million.
“The top of the funnel is getting bigger and wider daily,” said Rutberg managing director Rajeev Chand.
“When you look at the funding climate for mobile startups, the one word is ‘hot.’ There is a lot of money available across the consumer and enterprise segments.” Chand says mobile apps for enterprises are poised to take off they way consumer apps did a few years ago. “We see entrepreneurs pop up with enterprise app ideas weekly,” he said.
The capital needed to fund a mobile application is not as significant as that required to finance a company that is creating infrastructure equipment, so the average deal size is getting smaller as venture capitalists shift their focus to software and apps. But there are still some investors who choose to focus on infrastructure, which they see as a more stable and predictable play than mobile apps. Within the infrastructure space, distributed antenna systems, small cells, Wi-Fi and backhaul are all areas of interest for investors.
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