Investments into the Changing Economy: The mobile opportunity

In the face of the ongoing economic hysteria, the rollercoaster ride is all set to continue for startups and Venture Capital Funds alike. Yes, it’s true that the current financial climate is forcing venture capitalists to focus more resources on existing investments; however new investments will continue to happen and the bar may be a bit higher than usual.  Having a long term view can help to conduct a more objective assessment of the future of companies. The pace of innovation in India continues unabated and it will take many more shocks than the 50% decline in the stock market, rising interest rates, and declining rupee to dampen our spirits.

From the investor’s perspective, some sectors – particularly the capital hungry ones like infrastructure and real estate and those relying heavily on orders from foreign enterprises will fall out of favour for a while; others which are more capital efficient and focused on the domestic economy will continue to thrive. One good example of the latter is the Mobile sector.

The Mobile Opportunity
The rate of change of innovation in this sector is truly astounding. We (in India) have gone from a stodgy, unprofitable, elitist sector at the start of this decade to being one of the hottest sector of the economy. We have witnessed a radical transformation – the emergence and success of new operators, a phenomenal increase in monthly subscriber additions, the spread of mobile services to the remotest parts of the country, and more importantly the transformation of lives and livelihoods via mobile. 

We are now embarking on another transformation via the adoption of mobile Value Added Services (VAS) in India.  The increased competition amongst mobile operators and the realization of the potential has ensured that VAS has moved from being an afterthought to the center point of mobile strategy for operators.

Data adoption on Mobile
The US and European markets with 20%+ data ARPU are already following the Japanese and Koreans in terms of data adoption on mobile, that too when they have strong PC and internet penetrations.  Mobile Internet which no one took seriously in India a few years ago is now gaining momentum. 

A number of factors have come together to make this happen and point towards further growth: Cheaper and feature rich handsets, new operating systems like Google’s Android, new browsers like Skyfire or Mozilla mobile, innovative and useful applications…there are loads of innovations taking place in the mobile space! On the other hand, operators’ walled gardens are collapsing and data connectivity is improving.

The Open API model advocated by Google’s Android and iPhone is leading to a strong developer ecosystem being created for new applications. We will see more and more players adopting this route going forward.

Web 2.0 was powered by the spread of broadband and faster and cheaper computers and laptops - the same is likely to happen to mobile now, particularly in India.  The successful web players like facebook, myspace, twitter, et al are also now looking at mobile to drive their next wave of growth by rolling out their own “dot m” sites. This might lead to an emergence of new mobile focused social networks.

In addition to the opportunity in Mobile Data, there are some other promising areas:

 Convergence:  Media companies from TV to news to music and movies; each of them are building mobile sites and mobile services. Mobile is getting to become an important platform for interactivity.
 New services:  Mcommerce, Mobile Banking, Location Based services are all in the early stages of growth but likely to create a dramatic impact on us.
 New access mechanisms (e.g., Blue tooth) and new business models (operator independent, advertising based etc.) will be created that will alter the relationships between operators, technology providers and content providers.

The pace of innovation in this sector is unprecedented. This provides an opportunity for companies which can adapt quickly and have the right business models to alter the rules of the game. It’s quite possible that some great mobile companies will evolve from this bust. 

Harish Gandhi, Executive Director

Portfolio News

BharatMatrimony, India’s most trusted matrimony portal with over 12 million registered members launched BharatMatrimony Times – a magazine for Indians living in the US & Canada.  The magazine is the offline face of Consim’s flagship brand, BharatMatrimony.com. The magazine will feature interesting content on weddings, relationships, interviews with celebrities and highlight the activities of its portal in the North American market. The magazine will also bring to light the success stories of its members. 

iYogi, a next-generation personalized remote computer support services for consumers and small businesses, recently announced the launch of its services in Canada. iYogi will provide unlimited yearly subscription plans for (CAD) $119.99 and pay-as-you-go support options starting at (CAD) $9.99. iYogi offers 24/7 online and phone-based support services for laptops, desktop PCs and peripherals such as printers and multi-functional devices.

Blurb, a creative book publishing platform has tied up with Internap Network Services Corporation, a global provider of end-to-end Internet business solutions. With this tie-up, Internap’s data center co-location and Performance IP(TM) network solutions will help Blurb deliver to deliver a sleek, commercial-quality service to over half a million users worldwide. Internap’s enterprise-class data center will provide space, power and network to run Blurb’s website for the thousands of valuable publishing assets stored on Blurb’s systems

Events

Catch Harish Gandhi, Executive Director, Canaan Partners addressing at VAS India 2008,talking about “Mobile Advertisement & Marketing: The Future of Mobile Telephony?” on December 5, 2008 (1430-1600 hrs) at Taj Lands End, Mumbai.
The event will examine the potential for mobile content & entertainment in India along with the types of innovative service offerings that are most appealing to Indian consumers and to develop marketing strategies in order to incite the user to use advanced data services.

Get face-to-face with Alok Mittal, Managing Director Canaan Partners at TiE Entrepreneurial Summit 2008, at a panel discussion on “Entrepreneurship: Are You Ready For Venture Capital?” on December 17, 2008 at Hotel Grand Ashok, Bangalore.
The discussion will aim to provide entrepreneurs with a ring side view of the way VCs think, identify companies to park their funds and the expectations they have from individuals as entrepreneurs.

John Balen, General Partner at Canaan Partners Menlo Park office will also be participating at the TiE Entrepreneurial Summit 2008in Bangalore.
TES is Asia’s largest Summit that brings together a galaxy of entrepreneurs, venture capitalists, policy makers, academia, industry and thought leaders.