2010: The Ultimate Buyer’s Market for Investors

No doubt, 2009 was a year of dieting and fat-trimming for startups. But those that have conquered the financial tsunami will come out a lean, mean, revenue-ramping machine.

“2010 should be the ultimate buyers’ market for investors with cash to spend because entrepreneurs who tightened their belts last year cannot do so indefinitely,” Steve Fredrick and Don Rainey of Grotech Ventures write in a VentureBeat guest post.

As the economy gets better in 2010, exit markets will improve, so will investors’ confidence and appetite for risk. High-quality entrepreneurs and fit (read capital-efficient) companies are all perked up and ready to expand, providing potentially profitable opportunities for investors.

“The best time to buy is when confidence in the economy is growing, but prices are still low,” Fredrick and Rainey note. Now’s a great time to take advantage of the recovery to build good companies.

Below is a quick glance at what’s in store for the Internet and mobile space in 2010 according to professional investors. Which might give you some insights into the sectors that might worth your angel dollar. Don’t blindly follow herd mentality though. Use your own judgment and treat this as supplementary info for your research.

Cloud Computing

Cloud computing is quickly changing companies’ cost structure. Paul Koontz of Foundation Capital told New York Times, “Entrepreneurs were coming up with promising ideas for virtualization software and Web-based cloud computing, both of which give companies lower-cost options for maintaining their technologies.”

Fredrick and Rainey sing the same tune:

We also expect to see more money flow to the cloud in 2010. Cloud computing (and other operations) provides startups with an operational trifecta: cost savings, infrastructure savings and productivity enhancement. To date, many companies have been reluctant to move into this space because of security concerns, but these fears are rapidly easing as security offerings mature to address this risk.

Mark Ashida of OVP Venture Partners, however, believes cloud computing “is overhyped in terms of short term revenue.” He told TechFlash, “The transition to cloud computing will take time with companies trying out multiple models.” Even so, Ashida does think the cloud is a “growing innovative space.”

Data Management & Security

As technology develops and becomes more integral to daily life, data management and security issues become an increasing concern.

“Today, 80 percent to 97 percent of business e-mail messages are spam,” according to Ray Rothrock of Venrock, “and malware, software that infects computers, has grown exponentially.”

Therefore, “[s]ecurity companies that help Web sites and computer owners protect themselves are ripe for investment as well,” Rothrock shared his perspectives.

Mobile

When asked what he’d focus on this year, Fred Wilson of Union Squares Venture answered:

Mobile, but not just everything mobile but the things you can only really do on a mobile device, and I think the advance in things like acceleramators, and compasses, and GPS and having all of those on a mobile device, are gonna create opportunities for new gestures, and new ways that we’re gonna interact with entertainment or games in a mobile way. So mobile is interesting to me.

The mobile device is “the new computing platform that drives new ways to deliver/consume rich media and content as well as monetizing transactions,” said Bill McAleer, managing director at Voyager Capital.

As for mobile OS, “this year, investors are most excited about Android, Google’s mobile operating system,” NYT reports.

In 2010, people are expected to buy two to three times as many Android-based phones as iPhones, “ripping apart the hegemony of the Apple ecosystem,” Peter Fenton of Benchmark Capital commented.

Ashida (OVP Venture Partners) agreed:

Android OS and Droid Phone – one of the most exciting announcements of 2009. Could be a game changer to a two horse race – Apple and Google. (What happened to Symbian/Nokia and Microsoft?)

On the other end of the spectrum we got iFund manager Matt Murphy, who remains bullish on the iPhone and iPod Touch platform.

Social Media

The world has embraced social media. What once seemed promising is now starting to deliver. “[W]e expect social media to move from promising to prime time,” Fredrick and Rainey comment. But the trick will be on how to best leverage this to make money.