4 hot sectors in mobile generating VC action in 2012

2012 was a huge year in terms of venture capital deals for mobile, topping out at $6.85 billion across 990 different mobile deals, according to a detailed report on the subject by Rutberg & Company. The biggest winners in the space were companies across four hot categories: mobile commerce and payments, mobile healthcare, consumer apps and mobile advertising and marketing.

Analysts from Rutberg sat down with Fierce to explain exactly which companies received venture capital funding last year and to predict where the market is heading this year.

Mobile commerce and payments

Last year was by far the biggest for mobile commerce both in the number of deals and the total amount of venture capital raised. There was a shift towards investing in mobile commerce and mobile payments firms, with money flowing to companies like Square, Jumio, boku and Braintree.

"We don't think this is a bubble. This is a substantial long-term opportunity," said Rajeev Chand, managing director and head of research at Rutberg & Company. He added that there were "fundamental long-term opportunities in mobile commerce and payments."

Square raised the largest amount of VC funding last year at $200 million.

Both Chand and Nick Mayberry, senior associate of research at Rutberg & Company, agreed that Square was the clear winner in this space. Mayberry noted that Square will succeed domestically but may have issues expanding outside the United States, especially in Europe and emerging markets in Asia.

Another successful player in the space is Braintree, which earned $35 million in venture capital funding last year. Braintree is a platform that provides a mobile payments API and processes payments for apps like Angry Birds, Uber and Twilio. In an interview with Fierce, Braintree Communications Director Lisa Kornblatt noted that over $10 billion in sales are made on smartphones today, making this a huge growth opportunity for firms like Braintree.

Mobile consumer apps

Rutberg's report showed a wide range of companies that fell into its consumer apps category. The group covers everything from social networking and app discovery to various apps themselves. Within this group there's been a lot of growth in mobile photo and video apps. Instagram, Tango and Viddy were all top earners of VC in 2012.

"We've seen substantial growth from the iPhone launch date till now in mobile consumer apps. You have quite a number of IPOs in the consumer apps [field] in Silicon Valley in 2012," said Chand.

Chand warned that the consumer apps bubble may be about to burst, however. He explained that the mobile enterprise is catching up. "There has been a really dramatic increase in the mobile enterprise apps space. The reason for that is that mobile enterprise is where mobile consumer was 3-4 years ago," said Chand.

Mayberry explained that monetization is the key for this change. "I think we're seeing a much higher chance on return from enterprise companies than consumer companies," he said. Companies are still trying to figure out how to monetize games and other consumer apps, he added.

The biggest winner in the consumer apps category was Alarm.com, a wireless home security system, which raised a whopping $136 million last year out of the $350 million total raised in this space.

Mobile healthcare

While there has been increased activity in mobile healthcare, Chand warned that it is getting progressively harder for firms to get money in this sector. He noted that overall funds decreased from 2011 to 2012, even though overall numbers have increased to $1.2 billion since 2005.

Chand explained that while mobile healthcare is a popular field, investors are wary because it is very difficult to monetize. "One stat that I heard at Mobile World Congress: Out of the 40,000 apps that are healthcare related in the app stores, only 2 have a reimbursement code."

Mayberry stated that much of the growth in this space will be surrounding healthcare devices like wireless glucose readers including Telcare, which raised $25.5 million, and fitness related devices like FitBit, which raised $12 million in VC last year.

Mobile marketing and advertising

The number of companies receiving money in this space is decreasing, while the amount of money being invested into this space is increasing, explained Mayberry. Both Mayberry and Chand agreed that the marketing and advertising space is saturated with too many players.

"It is too confusing with all of the different companies with all the different niche solutions. We do think there's going to be a fallout," said Chand. He added that this space will be increasing dramatically, however, in the next few years.

In-app advertising network LifeStreet Media scored the most VC funding last year ($66 million), almost double the amount of the second most successful earner, Komli Media ($39 million), which specializes in mobile advertising in the Asia-Pacific market.

Mayberry said some of the players that show the most promise in this space are working to track users across multiple devices, such as from a phone to a tablet. He also predicted that mobile advertisers that incorporate personalization options will succeed.

"One observation from Mobile World Congress: The marketers were there even if they were not in the program," said Chand, adding, "the marketers were in Barcelona learning about mobile."

For more:
- see this Rutberg report