Venture firms cool on mobile application investment

Venture capitalists are now sizing up the mobile applications market with a far more judicious eye than a year ago, decelerating their investment pace in tandem with the slowdown in consumer spending, according to a Wall Street Journal profile of venture firms Kleiner Perkins Caufield & Byers (which unveiled its $100 million iFund for iPhone developers in April 2008) and JLA Ventures (which launched its $150 million BlackBerry Partners Fund a month later). "We tell developers we're not interested in funding lifestyle apps, or a garage business of one or two people," said Matt Murphy, the Kleiner partner who oversees the iFund. "We're looking for apps with proven traction... This is not a grant fund." BlackBerry Partners echoed the sentiment: "We've raised the quality bar higher than it was six months ago," said Kevin Talbot, vice president of the royal Bank of Canada (JLA Ventures' partner) and managing director of its venture division. "We're more selective. The pace has slowed a little bit, but it's just a pause. We're not sitting on the sidelines. There's no competition for deals, so we're just taking things slower."

After sorting through thousands of pitches, the iFund has so far invested in five developers: Mobile social network Pelago, home-security app iControl Networks, mobile games publisher ngmoco, lifestyle-and-motivation app Booyah and marketing platform Gogii. According to the WSJ, the iFund has not disclosed the total of its investment in all five firms, but adds that the capital allocated to the iFund is still available. As for the BlackBerry Partners Fund, it whittled applications from more than 3,000 developers to four investments: Location-based city guide Buzzd, mobile payment app Digby, travel management app MobiMate and analytics company Neuralitic Systems. A fifth investment has not yet been announced, but Talbot confirms the majority of the $150 million fund is also still up for grabs.

Both funds maintain they are still overwhelmed with entrepreneur pitches and plan to announce additional mobile investments in 2009 at roughly the same pace they did in 2008, with each fund investing in four or five startups. The Journal cites the growing number of mobile application storefronts as a likely catalyst for future investment. "We're still bullish," Talbot said. "The question remains, how do they monetize?"

For more on the state of mobile application investment:
- read this Wall Street Journal article