Image: pinkykeos
Mobile platforms are where a significant portion of the computing world is headed, and the iPhone and iPhone OS have been significantly responsible for that shift.
As of June 2009, ChubbyBrain found that over US$100 million in total VC/angel investment has been injected in 17 iPhone startups in the span of less than 2 years.
In their own words:
We identified $102.49 million in total VC/angel investment divided amongst 17 iPhone application startups (as of June 29, 2009). Perhaps this $100M+ number isn’t surprising given conversation that the iPhone may be bigger than the PC, but over $100 million in the span of less than two years for iPhone predicated startups is noteworthy.
VC firm Kleiner Perkins Caulfield & Byers (KPCB) alone accounted for US$50 million worth of investments; that’s half of the US$100 million iFund initially launched in March 2008.
(KPCB’s iFund is a US$100 million investment initiative that funds startups building apps for iPhone and the phoneless iPod Touch.)
3 months later in September, iFund manager Matt Murphy told Bloomberg, “It’s pretty clear we’ll go beyond $100 million,” and the firm will increase the size of the fund due to the popularity of Apple’s device.
The size of the customer base is “stunningly larger that most of us expected,” Murphy said. “Is it going to be 100 million a year from now, 200 million two years from now? I think so. Everybody still wants an iPhone.”
Not everyone’s bullish. This month, New York Times reported venture investors’ losing interest in startups that build iPhone apps. The publication quoted David Pakman of Venrock, “That was a very exciting place to look at; the growth numbers were off the charts, but I think we all understand now that it’s very hard to build big businesses here.”
In 2010, people are expected to buy 2 to 3 times as many Android-based phones as iPhones, “ripping apart the hegemony of the Apple ecosystem,” Peter Fenton of Benchmark Capital told New York Times.
Google’s Android is making news, no doubt. But if you’ve already set your mind in backing iPhone startups then you might want to take a look at the prospects and study how the big boys select their winners. This might give you some insights into the screening process and save you some time while you’re at it.
In 2009, smartphones only represent 14% of total handsets sold worldwide. Nonetheless, Gartner is optimistic about the potential of smartphones and predicted that sales will grow 38% by 2013.
In 3Q09, “smartphone sales surpassed 41 million units, a 12.8 per cent increase from the same period last year.” Carolina Milanesi, research director at Gartner said, “Smartphones continued to represent the fastest-growing segment of the mobile-devices market and we remain confident about the potential for smartphones in the fourth quarter of 2009 and in 2010.”
Even though iPhones only account for a small slice of global smartphone sales, Apple maintained its third position in the global rankings, with its worldwide smartphone share increased from 12.9% in 3Q08 to 17% in 3Q09.
“Its [average selling price] is holding steady and sales in the fourth quarter should be even stronger as Apple starts selling in China,” according to Gartner.
iPod Touch is also garnering some seriously ink of late. Broadpoint AmTech analyst Brian Marshall estimated “iPod Touch sales soared more than 100%, to 7.2 million, in the final quarter of 2009.”
Peter Farago, VP of mobile app analytics company Flurry, “believes it won’t be just a one-quarter blip.” He continued, “What we know for sure is that a huge new batch of iPod touch users was injected into the system.”
Wired’s Charlie Sorrel puts it into context –
iTunes Store downloads for the iPod Touch leapt almost 1000% on December 25th. That indicates that a lot of kids found iPod Touches under the tree this year.
There are now clearly added temptations in the iTunes Store, with a full line up of music, games, movies, TV shows and pretty much everything else teenagers used to head to the mall to spend their allowances on, and this alone would explain the spike.
“Teens and pre-teens tend to download far more apps than older iPod and iPhone owners,” Gagan Biyani of MobileCrunch quoted Farago. “The iPod touch has clearly become a major player for Apple in terms of app sales.”
And who’d question Apple’s global cult following? It’s got a user base that’s anxiously awaiting new applications; users are using the apps 30 times more compared to other devices.
Murphy said in an interview with mocoNews, “Steve Jobs quoted 60 million downloads in the first 30 days. That means 10 million iPhone users are outselling the entire U.S. market of 250 million mobile devices.”
App Store hit its one billionth download in April 2009. mocoNews’ Tricia Duryee estimated “about 100 apps are being downloaded every second-that’s 6,000 every minute, 360,000 every hour and 8.6 million a day.”
4 months later in September, Bloomberg reported “more than 85,000 applications are available through Apple’s App Store,” and 2 billion programs have been downloaded.
Just few days ago, Apple hit 3 billion downloads after “App Store saw a 51% increase in downloads from November to December.” Biyani shared his observations:
App Store downloads are 13 times greater than the Android Market. Additionally, the fact that the already-mature App Store saw a 50% monthly growth rate versus the Android Market’s 20% is impressive. One would think that the App Store growth would plateau at some point, but it doesn’t show any signs of leveling off just yet.
True, device sales and download numbers don’t automatically translate into app sales, but it’s likely that they’d trend alongside app sales, as Biyani pointed out.
Yes, the stats look good and the numbers are encouraging. But this is far from a comprehensive analysis, nor does it meant to be. You should do further research to assess future prospects before writing a check. The 2-part series simply aims to provide you with some quick pointers to help you screen more effectively should you decide to invest in the iPhone and iPod Touch platform.
Next, we’ll look at the type of companies VCs are backing and what they dig. Turns out, there’s a place for Android.
* For series, references are published in the last installment of the series.
Venture Hype respects your privacy. We'll never sell or share your email, and you may unsubscribe anytime.
Venture Hype’s constituency speaks really highly of them!
