This is an extended article, to an original shorter response I made to Roberts post here.
The iphone is without question, a game changer for mobile internet. It has woken up not only VCs to the mobile internet, but given the often arrogant and lacklustre stakeholders of the entrenched mobile industry a serious kick up the arse. I think the iphone is great; but you cannot get away from the fact it will remain a tiny percentage of the mobile market for many years to come.
Should VCs invest in iphone-only startups?
What I took away from the Mobile Web Wars last Friday, before the August Capital party, was that VCs might not invest in an iphone-ONLY startup. Im not surprised. They estimate 10 million units by early next year? Thats very small numbers if you’re going to ONLY serve those customers. It’s less than 10% of Facebooks user base. Infact, name one company which has sold for big bucks which has only 10 million users? That would mean a startup would have to reach 100% user takeup for their app to be highly valuable.
I have been frustrated, as many before me, that VCs have the particulars they do about investing in certain types of businesses and have the expectations they do for success – which in turn demand a big market and big ideas which can make big money; but I understand, because that is the game they are in. If you have to make your money back on your fund from only 5% of your portfolio, you have to make sure that probably 100% of your portfolio has atleast the probable chance of making it big – i.e. a 20, 50 or 100 times return.
We [my company, Rummble] are developing an iphone app for Rummble. Why? because we know we can deliver a compelling user experience, that it will work when users install it and that iphone users are typically early adopters or gadget lovers who embrace new technology. They are IT literate and are heavy web users. With an iphone, they take that mobile.
However, we’re also launching a Java app, to serve a vast block of the mobile user base out there, who have phones which will run Java apps.
Startups must consider carefully what I call the three R’s of mobile development: Reach, Resources, Return.
- What reach does the platform youve chosen to develop on, give you?
- What of your precious resources will it take to develop and support that platform? How does that Reach/Resources calculation look?
- What return does your target platform represent? i.e. how will you realise a return, where is the platform most popular, will stakeholders of that platform prevent you from (or take commission from) you realizing a return?
Consequently, bloggers – especially those with the ear of the startup community – should encourage startups to invest their development resources VERY carefully; for example, Google Gears will be supporting many platforms – I guess including iphone – and if they deliver on their promise, provide standardised hooks into the hardware, from the browsers, to access location api, camera, filesystem, etc, from the phone web browser.
The Valley cant afford to be so introspective with mobile, as it has been able to with the traditional Internet
Lastly, as a European, the valley – and many of its bloggers – are notoriously U.S. or atleast Western centric. The iphone IS FANTASTIC! I agree it is! But look outside your own back yard – Japan has been doing amazing stuff on mobile, without Apple, for a long time. India is skipping fixed line internet and doing all sorts of stuff from their non-Apple mobile phones. I’ve been using the mobile web on my Blackberry and before that on my other phones, for years.
The point is that people talk as is the mobile internet didnt exist before the iphone; and maybe for those people as individuals it didnt. But for millions of people it has – and although without question the iphone provides a fantastic user experience (its main reason for its success IMHO), it is expensive, proprietary and has a small install base. That said, I’m waiting for my upgrade to the 3G version :-)
The mobile internet IS the internet of the future
The mobile internet will, in the future, dwarf the fixed line internet and become the norm. It will make the fixed line internet (and I believe, most laptops) seem like the quaint anomalies of history – where the internet began. You’ll come home, plug in your 1 terabyte iphone-equivalent to a large screen and keyboard and simply unplug it and leave the house or office when you go. I believe I’ll be doing this within 5-7 years.
Those startups keen on building a global – or even U.S. – dominating consumer brand for their service, would be wise to look at what is going on in the rest of the world, where in some places the mobile internet is already ahead of both the U.S. and Europe.