As is the case in many industries, groups representing
the wireless industry in Silicon Valley have a tradition of concluding the year
by taking a measure of the hottest current trends, and gathering predictions on
what lies ahead. In November, the Wireless Communications Alliance (WCA)
held their annual “What’s Hot (and What’s Not) in Mobility event, and on
December 10, the Mobile Monday Silicon Valley (MOMOSV)
group held the “Year in Review and 2013 Predictions” at Microsoft’s offices in
San Francisco.
Both meetings presented a range of opinions,
on a number of different mobile-related topics, from panels made up primarily of
Silicon Valley Venture Capitalists (VC). The WCA panel included a
representative of Qualcomm’s Ventures
investment division, and the MOMOSV event, which was sponsored by Telefonica,
included a panelist from their recent acquisition of Tokbox.
In this article, we will cover the topics of software vs. hardware bias in the VC community, Mobile Payments and Mobile Advertising, and Device Platforms. Other topics discussed at the VC panels, such as enterprise mobility and 2013 predictions, will be covered in a subsequent article.
The WCA panel included:
- Omar Javaid, Managing Director, BBO Global
- Scott Raney, Partner, Redpoint Ventures
- Tae HeaNahm, Founding General Partner, Storm Ventures
- Quinn Li, Managing Director, Qualcomm Ventures
- Kevin Talbot, Co-Founder and Managing Partner, Relay Ventures
Mario Tapia, Director of MOMOSV moderated
a panel that included:
- David Blumberg - Managing Partner Blumberg Capital
- Todd Carpenter - Wilson Sonsini Goodrich & Rosati
- Rob Coneybeer - Managing Director Shasta Ventures
- Topher Conway - SV Angel
- Timothy Lee - Partner Sequoia Capital
- Ian Small - CEO Tokbox (acquired by Telefonica)
- Rich Wong - Accel Partners
Software
vs. Hardware
MOMOSV is primarily focused on the
application developer community, and hence stretches the definition of Silicon
Valley to accommodate the numerous software startups in San Francisco. WCA
typically addresses more hardware-related topics in their meetings throughout
the year, through their Special Interest Groups (SIGs) on Mobile,
Location-Based Services and Smart Grid. For the VC community, however, the
focus is very heavily on software and applications. At both the MOMOSV and WCA
events, hardware barely entered the conversations save for questions posed by attendees
in the concluding Q & A sessions.
The VC bias towards software is the
result of a relative advantage in capital efficiency, compared to hardware
startups, which promises a more attractive return for investors. The MOMOSV
event kicked off with a discussion of Facebook’s acquisition of Instagram for $1
billion, raising the question of whether price inflation (which some may call a bubble) is currently taking place in the
sector. Fierce competition for app developers has resulted in a new form of
exit for software startups, the “acqui-hire”.
Since the mobile startups primarily consist of teams of engineers, with no
sales or marketing, they make a prime target for larger companies such as Yahoo
and Google who may have little interest in the product, but a great desire to
add the talents which the teams possess.
Mobile
Payments
This popular topic was covered at
both the WCA and MOMOSV events. Rich Wong and Scott Raney both pointed out that
the concept actually includes many categories, and is not just synonymous with a Near-Field
Communications (NFC) equipped mobile wallet replacement for credit cards. There
was general agreement among the VCs that the big banks and credit card companies
will not be the innovators in mobile payments, that will come from application
developers, but they will house the technology and their participation is
critical to form a complete ecosystem. Raney said that app developers would be
competing against big players for the mobile wallet, but there are better
opportunities to create ancillary applications that can add value to
transactions, such as with loyalty cards.
Wong pointed to his firm’s investment
in Braintree, for their mobile
payment gateway technology, and also Stripe, who are developing a system to
enable developers to accept credit card payments online. Sequoia is invested in
Stripe, and also in Square. Redpoint’s Raney stated that Square is not a
mobile payment system, since they are really a Point-of-Sale (POS) system for
accepting credit cards with a mobile device. Kevin Talbot of Relay Ventures
used Square as an example of a startup that identified a “whitespace”
opportunity with merchants, but cautioned that there aren’t that many to go
after.
Talbot also made the most provocative statement on the topic, at the WCA
event, when he declared that
“NFC is DOA”In his opinion, NFC is a technology looking for a problem, and other technologies have passed it by.
David Blumberg is looking past
payments to financial services, highlighting his investment in CredoRax,
another developer of an online payment processing system. Blumberg also pointed
to opportunities in the 150 countries that lack credit bureaus, a whitespace
that Lenddo
is going after with a system that uses a measure of trust from your Facebook friends
as a proxy for credit scores.
Since advertising is so tightly linked to monetization, it is surprising that the topic of mobile advertising did not come up at all at the MOMOSV event. At WCA, Storm Ventures' Tae Hea Nahm said that “everyone knows it will be huge”, but that nobody has quite figured out how to monetize yet. Qualcomm's Li said that the challenge is targeting, which raises privacy concerns.
Scott Raney pointed to the issues of limited screen real estate on smartphones, saying that mobile ads are still at an early stage, with an insufficient number of advertisers to monetize. Raney is on the board of JumpTap, a platform for targeting mobile ads, but he sees the segment as equivalent to the state of online advertising in 2001. Raney finds the convergence of online and offline to be interesting, such as the rewards program developed by Shopkick, which enables users to earn rewards for visiting and purchasing from brick and mortar merchants.
Kevin Talbot also highlighted online-offline convergence with his firm's investment in KIIP, a startup that is building real-world rewards into mobile game play.
Device platforms and HTML5
The panel at MOMOSV took on this topic, with almost all of the VCs agreeing that mobile has come down to a 2-horse race between Google's Android platform, and Apple's iOS. Rob Coneybeer from Shasta Ventures described the situation as a stable duopoly. "Apple is happy with 20% market in places with money", he said, while they continue to acquire 80% of mobile revenue. Coneybeer sees the platform war as stable for the next 4-5 years, forecasting that we will continue to see new experiences on iOS first, and Android second. While that may be true for the most widely adopted "experiences", there are a number of examples, such as NFC-related applications, in which Android has been first to market.
Blumberg said that Microsoft's Windows on mobile will definitely be 3rd, but that the world is moving too fast for them to catch up. Rich Wong agreed with Coneybeer, saying that, realistically, mobile is a duopoly, but he hopes that Microsoft can battle to keep it from being that way. Todd Carpenter was somewhat more optimistic for Microsoft, offering his opinion that we will have a 3rd mobile OS, and that Microsoft will become more important in this space.
Ian Small, now an employee of Telefonica, apparently has adopted that company's belief in supporting the HTML5-based Firefox OS. Small contends that the smaller emerging markets are different, and that a more "open" platform will win out.
HTML5 drew an otherwise bearish response from the VCs, when asked if they were investing in that technology. Rich Wong explained that he doesn’t believe in HTML5 at all for the long term, and that it is for a small segment of the market. He correctly pointed out that the trend toward Android is accelerating, and that
it is swamping feature phones at the low end.
Coneybeer agreed, saying that there are better opportunities elsewhere. In his opinion, "native stuff" works well, and there are plenty of iOS developers. VCs focus on opportunities to build businesses with products that customers love, not on the language of implementation.
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