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The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups




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iphone-moneyWe recently revealed that $23.3 million had flown to Twitter-oriented startups from venture capitalists and angel firms (as of May 2009). Arguably, the other hot story in tech land is the iPhone and so we wanted to peer into the ChubbyBrain startup database and see how much money has been invested in startups predicated on the iPhone platform.

A brief recap
Applications for the iPhone were initially released in mid-2007 on iTunes when there were merely 500 available for download.  Earlier this year, Apple saw their one billionth download from the App Store.  Today, less than two years after the iPhone’s launch, the number of applications on the Apple App Store is greater than 50,000 according to some estimates.

Of these applications, it’s evident that a significant portion of them reside in either of two extreme ends of the spectrum that are likely not relevant to the VC/angel investing community: 1) established companies seeking some sort of presence on the iPhone to increase their brand’s awareness or product/service reach or 2) individual developers building cheap, viral applications who are enthusiasts/hobbyists or those hoping to catch lightning in a bottle.

But what about the middle of the spectrum?  Who are the startups looking to build scalable businesses with the iPhone at the core, and more specifically, who is funding such efforts?  After a look into the ChubbyBrain database, 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. Or perhaps for some of you, this number is a lot less than you expected?

The following analysis takes a deeper look at these investments with a focus on what startups are receiving money, which investors are supplying funds, the amounts of these investments, as well as other interesting trends/statistics that may have implications for the future in this space and/or be helpful to investors or app developers hoping to understand what has gone on to-date.

It’s worth noting that we limited the scope of this study to startups whose core functionality/capability is centered on the iPhone.  For example, Facebook is a venture-backed company who also have an iPhone application.  However, they do not qualify for inclusion in this study because their iPhone Application is complimentary, not core, to their business. Admittedly, this delineation was a bit of art and science but our aim was to remove those startups who might be building mobile apps or tools across platforms, e.g., iPhone, Android, Symbian, etc or where the iPhone element was complementary but adjacent to their core business. And so our $100 million number focuses on those startups who are tethering themselves in a large way to the iPhone platform.

So far, Kleiner Perkins Caulfield & Byers leads the way with $50 million committed across six startups.  This is, in large part, due to the $100 million iFund they launched in March 2008 with the specific goal to target the quickly expanding iPhone app market.

(Please note: To learn more about funding amounts, date of investment, etc, you can click on the company/investor widgets at the end of this analysis)

iphoneinvestmentlist


The aggregate statistics for these 17 companies are given below.

databreakdown

This table enables us to see that the median and average level of fund is relatively close but that there are multiple “large deals” that have taken place. iControl pulled down the highest single investment at $15.5 million, taking in a total of $20.5 million total for the company.  Just behind iControl is Pelago which took in $15 million in Series B funding. Both Pelago and iControl were funded out of KP’s iFund. From here we are able to look at the large disparity in funding between angel and venture capital investors over a period of time.

angelvcbreakdown1

We then broke down the 17 companies into individual industry categories and so the 2 charts below show this industry breakdown by number of investments and the percentage of money invested in each industry category. breakdowncompaniesperindustry2 ofmoneyinvestedinindustry1

These two charts show some interesting correlations between companies and investment trends. For the most part, the number of investments ties well with the amount of funding. Of course, large investments like those in iControl and Pelago do have the ability to impact the charts so it is worth looking at both the absolute number of startups funded and the money invested as you evaluate what areas are relatively hot within the iPhone ecosystem.

We also took a look at when these investments occurred as the graph below illustrates showing investments per month over the last three years.

numinvestments

Next, we took a look at number of investments per month against the interest in “iPhone Apps” and the “iPhone” more generally using Google Insights data as a proxy for interest. Google Insights offers a glimpse into how many searches have been done for a particular term, relative to the total number of searches done on Google over time.

interest2

It is worth noting that the large spike (blue line from Google Insights) in July of 2008 is the opening of the App Store. It can also be seen that there is an increase in investment activity after the opening of the store to customers.

interest1

Although the amount of investment activity has increased after the launch of the iPhone store, we do see that some of the largest investments iPhone predicated startups did come before the opening of the App Store.

Finally we took a look at iPhone startup related investments vs. quarterly iPhone sales reports. amountinvestediniphoneappsvssold1

After studying the “Amount Invested in iPhone Apps vs. iPhones Sold”, it is interesting to note that the number of iPhones sold mirrors the amount invested, but with a lapse of 4-6 months. The amount invested may or may not have any direct impact on iPhones sold but it seems to reveal a unique and interesting trend between the two metrics. Of course, this is with limited data so as we track these metrics over time, we’ll see if the pattern continues.

It will be particularly interesting to see where the funding levels go especially since this report comes within days of the release of the iPhone 3G S on June 19th 2009. Although the quarterly data is not yet available, there are reports that Apple has sold more than one million iPhone 3G S units on its initial weekend of sales.

With the release of the iPhone 3G S just a week ago, and speculation that over one million iPhones already sold in the first weekend, it will be interesting to see if an upward trajectory for iPhone-related companies will continue. We will revisit this analysis in several months to see how this study and the trends we’re currently seeing are faring at that time.

If you have ideas on where you see the iPhone funding trend going and which industries you feel will remain hot going forward, do leave a comment with your hypothesis.

If we’ve missed any startups that have been funded which you feel should be included, please let us know in the comments or via email to team(at)chubbybrain.com.

We look forward to your ideas and insights.

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46 Responses to “The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups”


  1. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] This post was Twitted by ChanduThota [...]


  2. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] figures are being reported today by “the ChubbyBrain database,” which keeps a running tally of venture capital [...]


  3. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] This post was Twitted by iamsingaporean [...]


  4. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Go here to see the original: The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs … [...]


  5. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] venture dollars are flowing into iPhone app startups at a decent clip. A new study by ChubbyBrain indicates that 17 startup companies — whose iPhone applications are core to what they do [...]


  6. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] For more on iPhone venture financing trends:- read this ChubbyBrain blog entry [...]


  7. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] The rest is here: The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs … [...]

  8. Jesse says:

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    I believe the iFund was setup for this with $100M. The iFund was launched in Fall of 2008, right around the time of the App Store. So it has only been 1 year, not 2 years since the VC Apps funding has begun! See http://en.wikipedia.org/wiki/IFund


  9. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] some really interesting analysis by ChubbyBrain (The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups) which estimates that $100 million in venture funding has already gone to iPhone apps insurgents in [...]


  10. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    http://endeavourpartners.wordpress.com/2009/07/01/not-all-applications-are-created-equal/


  11. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    Jesse,

    Thanks for the comment. This analysis was looking not just at what the iFund was funding but all investors plowing money into iPhone based startups. As you’ll see in the list of the startups we’ve cited above, while Kleiner Perkins is definitely an active investor in iPhone based startups via their iFund, there are several other investors participating in this segment.

    Hope that clarifies. Thanks again for the comment.

    Warm regards,
    The Chubby Research Team


  12. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] This post was Twitted by bparavasthu [...]


  13. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] nearing the one year mark of the App Store and according to an analysis by the Chubbybrain blog more than $100 million has already been invested in companies which focus on creating iPhone apps – [...]

  14. Ram says:

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    It is interesting that companies in the social networking space are attracting more money than companies in the “games and entertainment” space and companies in every other space.

    In the app store, it seems like social-networking apps are just around 5% of the top-paid apps and the top-free apps, while games and entertainment account for the overwhelming majority of top-paid and top-free apps. Of course, social-networking apps need high adoption rates to be useful to their users and getting to high adoption may require higher investments.

    Incidentally, the iPhone is complementary, but not core to the business of the top iPhone social-networking apps (AIM, skype, facebook etc.)


  15. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] nearing the one year mark of the App Store and according to an analysis by the Chubbybrain blog more than $100 million has already been invested in companies which focus on creating iPhone apps – [...]


  16. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Excerpt from:  The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs … [...]


  17. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] figures are being reported today by “the ChubbyBrain database,” which keeps a running tally of venture capital [...]


  18. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] (Original data sourced from ChubbyBrain) [...]


  19. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] resulting breakdown is not unexpected (and aligns with recent analyses of iPhone investments), but here are some interesting [...]


  20. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] startups have drawn more VC investment money than games, according to startup investment tracker Chubby Brain’s latest set of charts. Listing 22 rounds of funding for 17 companies, Chubby accounted for over $100 [...]


  21. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Regel von Business Angels oder Wagniskapitalgebern vorfinanziert. ChubbyBrain einen detaillierteren Blick auf genau diese iPhone-Unternehmen geworfen – mit teil interessanten [...]


  22. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] the VC investment is going By Ram A few days ago, the ChubbyBrain research team posted  results from an interesting study about VC/angel investments and iPhone startups.  The study looked [...]


  23. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] has already been more than $100 million invested in iPhone app-making startups, says VC-watcher Chubby Brain. Some $50 million of that comes from Kleiner Perkins Caulfield & Byers, which announced in [...]


  24. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    Are there investment groups focusing on marketing? Our TAPP application is complete, but we are looking into investors to assist with marketing.


  25. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] startups have drawn more VC investment money than games, according to startup investment tracker Chubby Brain’s latest set of charts. Listing 22 rounds of funding for 17 companies, Chubby accounted for over $100 [...]


  26. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    You forgot to include Pinch Media where Union Square ventures has invested


  27. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...]


  28. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Bereichen Social Networking und Spiele. Einzelinvestitionen betragen bis zu 15,5 Millionen Dollar.Chubby Brain hat errechnet, dass das Wagniskapital f


  29. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    Ouriel – Thanks for the comment and for keeping us honest :) You are absolutely correct. We’ll be sure to include Pinch Media in the refresh of this analysis. Appreciate the comment and for your diligence in reviewing our analysis. Thanks again.

    Warm regards,
    The Chubby Team


  30. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Chubby Brain, een onderzoeksbureau voor start-ups, heeft een onderzoek gedaan naar de investeringen die gedaan worden in nieuw gestarte ontwikkelbureau’s, nieuwe applicatie-ideëen of ontwikkelaars. Ze hebben een database van startups aangelegd, waaruit blijkt dat er in 17 iPhone-applicaties maar liefst $102.49 miljoen is geïnvesteerd. Voor velen is de iPhone de kip met de gouden eieren. Het is dus niet gek dat grote kapitaalbedrijven of andere investeerders zeer in deze markt geïnteresseerd zijn. De vraag is natuurlijk hoeveel van die investeringen ook daadwerkelijk terugkomen bij deze bedrijven en hoeveel ze opleveren (ROI). Er zijn inmiddels meer dan 60.000 applicaties in de App Store, waarvan het maar afwachten is welke succesvol worden. Geluk speelt een rol, maar ook het feit of je op de juiste websites wordt genoemd of onderscheidend genoeg bent dat iPhone- of iPod touch-gebruikers onderling applicaties bij elkaar aanprijzen. [...]


  31. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] 对此有兴趣的读者可以点击这个链接查看Chubby Brain公司对此的详细报道。 [...]


  32. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] data from Chubby Brain identifies $102.49 million in total VC/angel investment divided among 17 iPhone application [...]


  33. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Den Start-up- und VC-Spezialisten von ChubbyBrain war aufgefallen, dass zum Zeitpunkt Mai 2009 über 23 Mio. US-Dollar von Venture Capital-Gebern oder Business Angels an Unternehmen gingen, die sich auf Werkzeuge oder Optimierungen für Twitter spezialisieren. Da lag es nahe, eine ähnliche Rechnung für das iPhone aufzumachen. Aber natürlich nicht für die Hersteller von Autohalterungen oder Battery Packs. Nein, um die nach neuesten Apple-Zahlen rund 100.000 Menschen starke Gruppe der App Developer ging es. Die ChubbyBrainer fanden darunter – wohl ohne Anspruch auf Vollständigkeit – 17 Empfänger von Venture Capital, die gemeinsam über 102 Mio. US-Dollar erhalten haben. Dabei ist ein deutlicher Schwerpunkt bei den Entwicklern von “Social Networks”-Werkzeugen (31%) sowie Spielen (22%) auszumachen. Der Artikel ist mit zahlreichen informativen Graphiken aufbereitet und besonders lesenswert. [...]


  34. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] electronics, software applicativo e di infrastruttura, networking, storage, databases), dei 100 milioni di dollari indirizzati verso 17 iPhone start-ups, l’ultimo report pubblicato da Thomson Reuters evidenzia che nel secondo trimestre del 2009 i [...]


  35. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] is remarkable at the very least. The App Store now has over 65,000 apps and 100,000 developers. An estimate puts the total money invested in the iPhone app startups at $100 million. That is not all really. [...]


  36. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] at 2009’s venture capital funding activity in the mobile startup space shows that despite the $100 million plus already invested by venture capitalists in iPhone predicated startups, venture backed mobile startups are generally developing apps which work on multiple mobile [...]


  37. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] we’d previously highlighted that $23.3 million has flown to Twitter-predicated startups and just over $100 million has gone to iPhone-predicated startups.  So this $100 million into custom clothing companies by institutonal investors and angels is  [...]


  38. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] You can see all the fancy stats and graphs with some interesting trends. [...]


  39. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] look at Chubby Brain’s reported on what the Venture Capital industry has been investing in: The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups. Source Chubby [...]


  40. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] You can see all the fancy stats and graphs with some interesting trends here. [...]

  41. Joey Lo says:

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    Just want to clarify –

    In the “Percentage of Money Invested in each Industry” chart, the legend for Voice Messaging is missing. I assume it’s the 11% represented in the chart?

    Also, does the 0% represent the money invested in Diversified Application Development?


  42. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    Joey – Great catch. Believe you are correct on both counts. Thanks for the comment and making the clarification.

    Regards,
    The Chubby Team


  43. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] You can see all the fancy stats and graphs with some interesting trends here. [...]


  44. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] of June 2009, ChubbyBrain found that over US$100 million in total VC/angel investment has been injected in 17 iPhone startups in [...]


  45. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] aggregate data, ChubbyBrain offered a breakdown of companies per industry that have received angel and VC funding. Industries that appear [...]


  46. Warning: Illegal string offset 'keywords_time' in /home/chubbybrain/public_html/blog/wp-content/plugins/internal_link_building.php_/internal_link_building.php on line 103

    [...] Looking at the ecosystem is a little bit more challenging, but in some ways more important.  A key measure is how much money have investors put behind Twitter based startups?  We know that as of June 2009, $23.3m had flown to Twitter-Based Startups (vs. the $100m+ attracted by iPhone startups) [...]

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