Thank smartphones, applications, data demands, network upgrades/buildouts and the "Internet of things" for a lot of the venture capital flowing into wireless these days.
According to a report released today by GigaOM Pro, venture capitalists invested $312 million in 37 mobile and wireless companies in the second quarter of 2010, representing a 2 percent increase from the capital invested in the previous quarter. Funds invested in the mobile and wireless space represent only 5 percent of all VC funds invested and 6 percent of deals closed in the second quarter of 2010.
Hot areas in wireless include mobile payments, mobile applications, social networking, M2M and "anything around user interfaces," says Peter Crocker, GigaOM Pro analyst and founder and principal analyst at Smith's Point Analytics. GigaOM Pro partner CB Insights provided data for the report.
Crocker says the majority of VC investment directed toward the mobile and wireless industry is in the area of mobile software and services companies compared to wireless telecom services. But the largest deal over the past four quarters happened to be one in the telecom services market: ExteNet Systems, the provider of distributed antenna systems (DAS), raised $128 million in the first quarter. Crocker says the large amount of capital required to fund ExteNet's business and the tight exit market dictated such a large investment.
That was far and above the largest deals that were done in the second quarter, which at the top end was Row 44 with a $27.75 million round and Jasper Wireless at $21 million. Rounding out the top five in the second quarter were Foursquare at $20 million, Zong with $15 million and Sencha at $14 million.
What about mobile advertising, where big players like Apple and Google dominate with brand? Crocker says he's not sure any VC is looking at that market now. "To disrupt that business model may be challenging and then to compete in that business is also going to be challenging," he says, adding there are always opportunities for niche players. He puts Google's market share at 24 percent when taking into account its acquisition of AdMob.
Along with the rest of the market, the exit opportunities for mobile and wireless startups have improved over the past few quarters. Notable exits and M&A deals in the mobile and wireless market over the past three quarters include Apple buying Quattro Wireless, Google's acquisition of AdMob, the IPOs by TeleNav and Motricity and SAP's acquisition of Sybase.
It may or may not be surprising that the three dominant states in mobile VC are California, New York and Massachusetts. Crocker says the significant engineering skills required to bring mobile and wireless products to market presumably will continue to keep VC investments focused in those three states.