PEhub is reporting on some interesting early stage/seed stage fund raising date. Seed and early stage rounds are all the rage and the number of investments is up – 464 in Q2 2011 vs 374 in Q1. However, it was flat vs the previous Q2, so I think we are seeing some of the typical Q2 deal bump.
More interesting is the fact that deal size is increasing, per the chart below:
Techcrunch has an article on how Microsoft’s online division has lost money for the past 22 quarters. That’s a long time.
The article takes a pretty negative tone toward Microsoft. The comments seem to indicate that people think Techcrunch is continuing it’s Google and Apple lovefest and is attacking Microsoft because of this bias.
Regardless of TC’s bias towards or against Microsoft, I think the piece could be written about Google – if you replaced “MSFT” with “Google” and replaced the highly profitable “Windows and Office Divisions” with “Adwords” and replaced the loss making “online division” with “everything else at Google.” Basically, Google is still struggling to make money in other divisions that are not search and ad driven.
The battle between Google and Microsoft isn’t a battle for sissies. They aren’t fighting for second place – they are trying to destroy each other. Google doesn’t mind losing money in Chrome (OS or browser), Android, or Docs if it hurts Microsoft where their chief source of cash flow is (i.e. Office and Windows). Microsoft is willing to lose lots of money to try to make Google’s primary source of income, online search/advertising, hurt. They each also understand the importance of the other’s core divisions, and they both want a real piece. Disrupting either is going to be hard and expensive.
That’s the reason each is willing to have their profitable divisions subsidize their losses in the other divisions.
So, is this an opportunity or threat for startups trying to compete in or around these spaces?
Well, it’s a little of each, IMHO. It’s an opportunity, since if you manage to get traction in either area you have two fight-to-the-death potential acquiring companies. But it’s a HUGE threat too, because if you choose to enter one of these areas you are competing with two huge titans who are willing to make economically insane losses to get marketshare. For example – let’s say you are trying to do an email startup (this is just an example). You are competing against two companies that likely have a very different business model than you can afford. They just want users/marketshare of their email services, and the revenue and margins are not particularly relevant. So if your business model requires making money… well, you could be in a really tough spot.
To compete against either you need either an enormously better understanding of the customer, translated into a massively better product… or amazingly deep pockets.
Ok, to be a little less histronic, internet map access from fixed computers (i.e. ‘landlines” if you will) shrank, while mobile map app access grew a lot. In fact, according to Comscore, it looks like internet map usage is up almost 9%, but this is totally because mobile map usage is up 39% (ie access from a mobile device and not a computer).
Are we seeing the innovation around mobile maps? Or is this space totally dominated by Google Maps? It’s hard to think of a more valuable piece of mobile real estate, although to be honest I don’t know if Google is really monetizing it all that well. I tend not to be hit by ads when I look up addresses or directions on my phone’s map app.
I tweeted this the other day and got some good retweets, so I figured it was interesting to other people too!
35% is a lot, but it is also clear that there is still room to grow. (see the report here.) I don’t think we’ve yet hit the point where growth in mobile advertising will slow down (the pundits are saying mobile advertising will be $1.1 or $1.2 billion in 2011), and the itunes of the world that I continue to say is the major distribution engine for today’s most interesting startups is just revving up.
So, basically, if you are an internet startupper, it is in your best interest to have the latest and greatest smart phone. Looks like I”ll have to be in line for the next iPhone I guess!
The first half of 2011 wasn’t great for venture capital funds looking to raise funding. While the total dollar amount for 1h 2011 is higher than 1h 2010 – $10,419 million from $6,132 million – the number of funds raising that capital continues to shrink. My source is a PEhub article.
PEhub also points out something else being hidden by the increase in dollars raised figure:
Adding insult to injury, half the amount of those funds raised — $2.7 billion -– went to Accel Partners. The Palo Alto, Calif.-based firm raised an $875 million growth fund and a $475 million early-stage fund in less than two month’s time, according to a release that Accel issued several weeks ago.
It’s not a great time to be a third tier VC…
The industry is shrinking. With fewer and fewer funds (even if the overall dollar amount invested with funds stays constant) it will be harder and harder for startups to find funding. Maybe angels will be able to fill the gap for some internet startups, but traditional VC industries like biotech and cleantech and computer/telecom equipment will be really hurt by this trend.
Healy Jones | 
Business plans, Cloud computing, Customer behavior, Entrepreneur tips, Execution, Marketing strategies, mobile, officedrop, online marketing | 
07 8th, 2011| 
No Comments »Interesting research from Flurry again (they were the ones who put out the info that mobile app usage is topping regular web browsing). This time they have data showing that free or “freemium” app titles are generating more revenue than pure paid apps. From a MediaPost summary of the research:
Flurry shows that over the last six months, revenue from free-to-play game apps has overtaken that from paid apps. Among the top 100 grossing games in the App Store as of June, more than two-thirds (65%) of the revenue generated came from freemium games and 35% from paid games.
That’s nearly opposite the situation from six months ago, when paid game apps accounted for 61% of revenue and free titles, 39%. What’s changed since January? Peter Farago, vice president of marketing at Flurry, pointed out that Apple began counting in-app purchases toward app gross revenues at the end of 2010, reflecting the impact of that sales stream in its ranking of top-grossing titles.
So, this research is focused on games, but OfficeDrop is betting the same will be true for our b2b SaaS app. We switched to a freemium model earlier this week, mainly driven by the feedback we were getting in the app stores. App store people just expect to try stuff for free and don’t like free trials. We can’t get them to read the app description that talks about the free trial period; they just look at stars, download and then leave a nasty review without trying the service. Hopefully this freemium experiment will pay off for us. Initial web signups are promising, but it’s too early to tell!
What happens to the web if apps continue to dominate? Jordan Elpern-Waxman wrote a response to one of my earlier posts about mobile app usage overtaking web browsing time. His basic premise is that apps won’t end up killing the web. I guess the question is will apps eventually kill the browser… I am pretty sure that in the next 5 years the browser will continue to be important (it’s hard to think beyond that time frame – at least for my little brain).
The browser is still a great way to discover and consume content. But there are content oriented things that I’ve switched to consuming via apps. For example, I now have the Wikipedia app on my phone. It’s a little slow, but I still use it. I have noticed that for many trivia type questions (how many people live in San Diego, for example) Google tends to return Wikipedia as the top one or two result. So instead of going to the browser, hitting Google, asking the question I now just go directly to the Wikipedia app on my phone and visit the particular page on the topic to get my answer. It’s just as fast because it requires fewer steps. But will I ever have a Wikipedia app on my computer? I kind of doubt it.
I also still like consuming news content via a browser. I guess there aren’t any downloadable PC/Mac apps for consuming content, so the browser is the way to go. And on the phone I like the new Bing interface for reading article. Although, now that I think about it, people are using the instapaper type apps to read content. Hmm. Maybe the mobile browser is dead! But I still doubt that the desktop browser dies.
