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August 2, 2012updated 10 Jan 2016 3:19pm

Why Smart Phones Are The Smart Choice for Venture Capital

By Spear's

With over a billion smartphones worldwide, they offer boundless opportunities for the venture capitalist, argues Frederic Lardieg of Octopus Investments

THE ADVENT OF the internet in the late nineties was an exciting time for the venture capital community. PC and broadband penetrations were increasing rapidly, new online business models emerged and many successful companies received funding. Fifteen years later, we are seeing a similar reaction from venture capitalists with the advent of smartphones and fast wireless networks. It is quite possible that mobile will represent a bigger opportunity for VCs than the previous internet boom did.

The first obvious advantage that mobile has over the existing PC-based internet ecosystem is reach. There are now more than six billion mobile phone subscriptions globally, with smartphones making up almost one billion. For start-ups looking to develop and distribute mobile services and content, this represents an enormous addressable market from day one.

Beyond global reach, VCs are excited by the promising opportunities opened up by the advanced capabilities of mobile devices. There is a reason these devices are called ’smart’. Compared to a relatively dumb PC, a smartphone interacts with and ‘senses’ the world around it. A mobile device knows where it is located through GPS geo-localisation, it can interact with real-life objects through barcode scanning and it can exchange information with nearby devices via Wi-Fi, Bluetooth and other technologies.

These smart capabilities make mobile devices the perfect bridge between the online and the offline worlds. They open up a range of new services and user experiences that we have only started to see. People are already getting accustomed to comparing prices or reading customer reviews on their phone before making purchases in physical stores. We have also seen the emergence of a range of local marketing solutions that aim to drive passers-by to enter nearby shops, from proximity based vouchers to mobile-enabled loyalty programmes. But this is only the beginning, with many more services and experiences still to be invented and built. The space at the intersection of online and offline holds tremendous promise and is likely to attract significant VC investments over the next few years.

The large players in the mobile industry are also trying to capitalise on the mobile phone’s new role as a bridge between online and offline. For example, Apple has incorporated ‘Passbook’ into the latest version of iOS, its mobile operating system. Passbook is an application that will hold all your store cards and vouchers which you can then simply present at the till to pay for goods or get discounts. This type of application lays the foundation for mass adoption of online to offline services. A door has been opened for entrepreneurs to tempt venture investment. And it’s been opened by your phone.

Frederic Lardieg is on the Ventures team at Octopus Investments


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