Startups and Funding: July 2008 Archives

I usually don't get to write about the events I attend, but with two events in a row (Facebook's F8 and Venture Beat's MobileBeat 2008) and two more to come (TechCrunch's Mobile Web Wars Round Table and TechCrunch's Annual August Capital Meet Up) I need to organize my notes -- and why not do it here on the web.

F8 was a waste of time in general - Mark Zuckerberg's keynote was fine but the next talk that followed him on stage was long and mostly just asking-for-applaud.  it became boring rather quickly, and the different tracks did not offer much.  I switched between sessions in hope of finding useful talks, but at least to me the time could have been better used.  I left early.

MobileBeat was a different story.  There were four panel discussions, and pretty much all of them offered useful information.  The panelists knew what they were talking about.  I for one learned quite a bit.  I'm sure different people left with different takes -- here's mine.  These are not necessarily related - just notes from the event:

• A lot of talk about iPhone.  However, people did mention a few times that internationally the number of iPhones is insignificant compared to other handsets.
• Nokia has a 70% penetration in India.
• The problem with Apple's iTunes App Store is that it's another walled garden.  And the same old pattern is happening there:  A small number of apps show at the top of the list, they get more downloads because they are at the top, and they keep staying at the top.  Vicious circle.  Few apps will find a chance to be "discovered".
• About 6500 apps exist for BlackBerry today.  About 70% of these apps are vertical.
• Unless you have a specific network and customer line up, being vertical makes apps less attractive to the VCs since there's already a small percentage of people who download apps, and for a vertical app this makes the number of downloads (hence growth) even smaller.
• For the same reason VCs prefer to see apps that would work across all platforms, not just iPhone.
• At the same time, a number of companies such as Loopt has found iPhone a good platform for the initial launch - call that your beta.  Do it on iPhone because development is short and download problems are not huge.  Then study the reaction of your users, who are usually the early adopters.  If that works out well, then think about releasing the same app to other platforms such as Windows Mobile or Symbian.
• Despite all the talk about how Apple is eating AT&T's lunch with the app store, AT&T is not much interested in the app revenue.  The revenue from the customer, including the voice, SMS and data plans, dwarfs the app revenue.  So they prefer to focus on the infrastructure and the "network", not the apps.
• VCs are less interested in replicated what's available on PCs on the mobile devices, that's usually done by larger companies anyway and is hard to compete with.  They look more for things that would have not been possible if the devices were not mobile.
• Games are the most popular apps on mobile devices.
• Among interesting topics to mobile VCs are edge issues (such as acceleration), identity management, and discovery of content/apps.
• iFund seemed to be pleased with the investments so far, and they seem to be ready to expand their fund if they see more iPhone opportunity.  Before iFund they have practically never seen a "successful" mobile investment.
• Numbers are amazing (or I should say scary):  In all these years only about 143 mobile M&A transactions have happened in the market, of which less than 20 are more than $200M, and less than 35 are more than $100M.  This means little success in mobile VC investment.
  
• Advertisement is still considered the biggest way to monetize.  However, brands do not prefer deep-inside-the-app advertising, because the user experience does not allow the user to easily "click through" to the target site - user usually does not (or cannot) leave the app.
• Referral fees are also a good business model.  It's possible, for example, to have an app on iPhone that refers the user to a song within iTunes.  If the user buys the song the app gets a cut.
• Also using Virtual Goods as a monetization strategy came up a few times.  Interesting.
• MySpace has about 1.7M users on their mobile web portal.  Facebook seems to be about the same.  These are US numbers.  MySpace also has downloadable apps, but they did not disclose numbers.  I guess if download was in the same ballpark as mobile web users (or more) they would disclose, so it should be considerably less.
• Some interesting numbers in terms of mobile usage in the US:
• Number of subscribers:  232M in '07 ---- 255M in '08
• Those using SMS: 140M in '07 ---- 198M in '08
• Those using MMS: 77M in '07 ---- 123M in '08
• Those with data plans: 74M in '07 ---- 95M in '08
• Of 95M users with data plans ony 40M actually use Internet services, of which 30% are on smartphones.  4% on iPhone (part of the 30% smartphone), but the iPhone users' usage is 5X the average smartphone user.
• The discussion on whether one should write the app for mobile web or as a downloadable app did not coverage to a specific black and white answer.  The consensus was that you should look at your audience.  For example, if it's a business app you would probably want to write an app for BlackBerry.
• AdMob's CEO was emphasizing that advertising on mobile is already happening.  They are serving 3.5 Billion ad impressions (sorry - can't remember if it was "per day" or "per month" - but the number is too huge anyway) internationally.  The CPM is $10-$30 in the US.  A lot lower internationally.
  
• Forget about Java development for handsets in the US.  The download issues are just too much hassle.

I'm sure there's more, but this is most of what I remember from my notes...

I have seen a lot of material on how to prepare a VC pitch, and based on VC meetings I have been to I can tell you that in general this article covers a lot of good points.  Notice that it's B2B, so a consumer play pitch would be a little bit different (specially more on marketing and go to market strategy is needed).  Also in general the article tends to assume it's not a seed round:

"When it comes to presentation, it goes without saying that the best pitches:

• Tell your audience what you're doing, why the market will be big, and why you will win.
• Provide an imperative and a sense of urgency - they answer the questions "Why now?" and "What's changed?"
• Provide real insight - into the market, customer pain, or a unique approach.
• Hook the investor - with compelling customers or user numbers (unless it's a seed stage deal - even then, potential numbers or customers are helpful).
• Are delivered with knowledge, passion, and conviction by the entrepreneur."

Read the full article at Tech, Startups, Capital, Ideas. » Perfecting Your Pitch.