That might be the case for venture capital investments in mobile solutions and firms between 2000 and 2009, compared to what could happen between 2010 and 1019, when it is possible there could be less investment by venture capitalists in mobile start ups, compared to the 2000 to 2008 period.
In other words, though venture capitalists are investing far less money in mobile companies in 2011 than they did in 2000, most of the payoff from two decades of investments will come over the next decade.
True, the venture capital business is different from the mobile service provider business. VCs rarely invest in service provider or content producer companies, preferring software and hardware plays.
The service provider business, on the other hand, invests more heavily than the VCs do, with returns that are more incremental, but still important. In part, that is because service provider investments in wireless allow those service providers to adapt to changing end user demand.
Also, wireless network investments and improvements are what enables application and device performance to be realized.
In the five year period between 2007 and 2012, for example, wireless revenue will exceed wireline revenue by a significant and growing margin.
Small business spending on wireless services will exceed spending on fixed-network voice for the first time in 2012, says In-Stat. Put another way, wireless services will become the single-largest category of small business spending, bigger than broadband access or fixed-line voice, for example. Small business wireless spending exceeds fixed line spending
Though it is possible less money will be invested by VCs in start ups in 2010 to 2019 than was invested from 2000 to 2009, the economic and social impact will undoubtedly be greater in the latter period, than in the former period.
One major reason is simply that the essential background environment, including processor power, cost of memory, cost of application development and adoption of broadband, especially mobile broadband is qualitatively different.
In 2000, for example, the total number of U.S. broadband lines totalled 7.1 million, according to the Federal Communications Commission. In 2011, that number is about 86 million to 87 million. About 84 percent of U.S. homes using the Internet do so using broadband connections.
In 2000 there were about 97 million U.S. mobile accounts in service. In 2011 there were 323 million U.S. mobile accounts in service. More significantly, few mobile users had smart phones, or broadband data connections in 2000, and nobody had a faster 4G connection.
Those physical limitations of devices, access speeds and users mean that what was possible in 2000 was simply an order or magnitude, or two orders of magnitude, worse than what is possible in 2011.
In fact, looking only investment with only a five-year lens, investment levels are up. Over a longer 10-year period, though, investments are down sharply. So 2009 was not a turning point for venture capital in the mobile space, though it might appear so, looking only at the 2006 to 2010 period.
Still, one might argue that much of the investment 10 years ago was “too early,” with much of the infrastructure required to support a huge mobile transformation of business, commerce, entertainment and content simply too undeveloped.
In 2000, the sum of equity invested in the wireless industry peaked at $3.79 billion, according to The MoneyTree Report by PwC and the National Venture Capital Association.
And 2011 investment is likely to be lower than 2010. The average amount invested between 2000 and 2010 was $1.18 billion a year. But not since 2007 has equity invested even passed $1 billion. Mobile investment up or down?
Also, the rapid rise of the iPhone, iPad and other mobile devices has fueled a mad rush of venture funding into consumer-facing mobile companies, rather than enterprise apps.
During the 2011 first half, according to Rutberg & Co., venture capitalists invested $3 billion into 358 mobile companies, with $960 million going to the “media and applications” sector, defined as social networks, mobile games, mobile advertising, app platforms, news aggregation, photo sharing and group messaging.
VC investment in enterprise mobile companies has been more tepid. According to Rutberg, VCs invested just $254 million into “enterprise IT” mobile companies over the same span. Consumer investments more popular
Keep in mind that venture capital is only one source of investment in mobile initiatives, with arguably more investment being made by established ecosystem participants, ranging from firms such as Google and Apple to RIM, Nokia, HTC and mobile service providers.
“We are in the beginning of a 10-year cycle in which mobile computing will reshape the way consumers live and businesses operate,” wrote Rutberg researchers in their July 2011 mobile report. “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.”Mobile decade coming
Mobile commerce will be one expression of the change, as will the subsidiary mobile payment, mobile wallet, mobile remittance, mobile shopping, mobile promotion and mobile advertising businesses.