This is the list of internet and mobile seed and series A investments for the first half of 2011 I wrote about in the previous post; however, with so many open source deal tracking sites available (Chubby Brains, Crunchbase, Venturebeat to mention three), a deal list is hardly worth writing home about.

What is worth writing about is who invested with whom in each deal: out of a total of 41 Seed and Series A deals, 12 were by made by angel syndicates, 6 by angels and VCs co-investing and 8 by VCs (with the remainder by asset management and corporate venturing investors).

It has been talked about before:  the so called “equity gap” – especially in the UK – which resulted in a dried up deal-flow for later stage VCs and caused the latter to venture out to earlier stage deals, co-investing (and seeding) alongside angels.

Has angels/VC co-investing at last come of age? If my graph is right, it seems so, at least in the US.  And since it has been remarked upon in the recent AngelBootCamp (video) in Boston, it must be official.

Notes for entrepreneurs :

• The participation (or not) of a VC does not seem to affect the size of the seed round which hovers at sub £1M.
• British deals are notable for their small number; let’s hope that this is because angel deals are less efficiently reported in the UK than in the US.

Notes for angels:

• Unless one is a household angel name, the VCs will remain reluctant to co-invest bar “special situations” (read: downrounds & re-starting).
• Well coordinated, tightly managed, small angel syndicates will be the entry point for angels with the necessary risk-tolerance and knowledge but with only modest amounts of capital.

So, is this a new era for startup fundraising? Are the days of entrepreneurs’ agony of how to cross the “equity chasm” from angel to institutional numbered? They will soon be. But the VC is a cyclical industry with short memory from one cycle to the next.

Will this give birth to a flourishing British entrepreneurial scene? No, that can’t happen, but – as with other initiatives which have emerged, like Tech City’s clustering and the meet ups in the Silicon Roundabout – it will help. What makes things happen is good ideas, capable people and risk-calibrated investors.

H1 2011 mob & internet

The Internet bubble is not: despite Snapguide’s strap line on the company’s holding page on the web, it is neither showing nor telling much but is however closing a $2m round with Index, Atlas Michael Arrington (of Techrunch), Dave Morin (ex-Facebook, founder of Path) and Gary Clayton (from Nuance voice recognition). Anyone of you who remembers the dotcom era might feel uncomfortable with the size versus stage of the round: $2m with no evidence of customers. But this time is different. Really. People have been there and done the bubble and, in contrast to the markets, private equity investors have a long memory (too long sometimes).

Female founders on the up (at last): everloop  & shadow government are both female led and got angel funding. We will be eagerly tracking progress.

Same old, same old? The Paris-based mobile developer Storific got $150k  seed money from Kima Ventures to develop a mobile platform that lets customers place orders in restaurants, bars and hotels. I saw a couple like this lately, one from a team of MBAs. I did not think it was worth taking it further: Kima obviously knows something I do not. To the MBAs to whom I said no, (if they read this) mea culpa, it is likely that I was wrong.

Mixing business with pleasure: Hollywood star Ashton Kutcher brings glamour into investing with his participation in Zaarly (buy & sell anything with the people around you); and British writer, comedian and the ‘QI’ minded Stephen Fry seeds the Bath (UK)-based Ubitek Ltd .

The new kids on the block: LA based Sharesquare launched their beta QR code for groupies (aka performers’ followers and lovers) after raising ca. £100k from  hacker angels .

And this is why it matters: because of the limited capital they have available vis-à-vis the size of the round, most angels can invest only at seed stage which means they are planning for a 7 to 8 year holding period. Does it make sense to target an IRR of less than 30% for the risk they take on? For that IRR, one needs a cash multiple of 8-10x (see table below for converting cash multiples to IRR).

Allowing for dilution in the follow-on rounds (during which time the startup may have to issue up 100% new capital), the angels should arguably be targeting multiples of 15x or even 30x.

I was about to work out an example on this, when I came across this one by Luis Villalobos of Angel Venture Partners

Even with the most optimistic of exit scenarios:

1. angels have little option other than driving a hard bargain on the valuations at startup/seed stage to allow for an adequate holding period; this leaves the entrepreneurs disincentivised and perhaps diluted too much, too early, if they shoot for too much, too early.

2. angels need to look for companies with exit value such as to give them at least 30% IRR. Considering the relatively small size of the UK market and the modest projected GDP growth for the next decade, it will take real talent to navigate the choppy waters.

But one can make an exception for the We Own It Summit which, after its inaugural year in NY in 2010, is coming to the UK this year sponsored by the Kauffman Foundation, Imperial College London Business School, Silicon Valley Bank and SNR Denton.

The speakers are impressive, and I’ll note but three here: Jeanne Sullivan, partner at the New York based  StarVest Partners LP (backers of NetSuite); Sharon Vosmek, CEO of Astia.org; and our very own (geographically) Simone Brummelhuis, Astia VP Europe. and founder of The Next Women)

I look forward to discussing “what routes can and have women taken to become angels and venture firm partners, making early stage investments in high-growth companies” on Panel 6 and attending as many of the other panels as possible.

Attendance is “by invitation only” : if you are interested in attending email invitation@weownitsummit.com.

Check out their blog www.weownitsummit.org/blog

2. Google & its Android have what it takes: laid back, quirky with purposeful attitude. Source: their buzzing stand at Hall 8 (for those who missed the opportunity to androidify a friend, here is another chance) and the lederhosen-wearing Android Guru.

3. The Nokia /Windows Phone 7 partnership: two drunks supporting each other or a prelude to an acquisition? If there is still something left over from the corporate market for mobile phones, Nokia/WP7 will probably go after it and leave RIM out in the cold. Source:  heard by the coffee place at Hall 8.

4. Three top themes: mHealth, mpayment and msocial networking. That’s the easy part: knowing which platform technologies will dominate each field is the hard bit. VCs are betting the house, mobile operators threw in the towel and entrepreneurs are assembling en masse at the starting line.  Source: Counting apps at the App Planet Hall.

5. Facebook was at the MWC: Not! But the first facebook-centric new mobile was there.

6. Apple was at the MWC : True, although not physically. Apple’s influence was apparent from the iphone look-alikes  to the new ipad-looking HP Touchpad

7. Blackberry is (possibly) a lost cause: reportedly people went up to their stand asking help to download the MWC app only to be encountered with an anxious, polite yet ineffective grey suited man at the stand who “knew how to do it but had forgotten it” (said while he was browsing madly trying to remind himself). What happened to the “know your product” commandment? Source: Agonising Blackberry users at MWC.

8. Rebtel is officially the No 2 VoIP in the world and the No 1  mobile VoIP.   Source: Andreas Bernstroem, CEO Mobile Ventre Forum presentation, MWC.

9. Movirtu has officially broken the link between SIM cards and mobile phones and are bringing the next 1bn customers to mobile operators. You own a SIM/number (and therefore you exist in the virtual world) before you can afford to own a phone. Source: Nigel Waller, CEO, Mobile Venture Forum presentation, MWC.

10. NTT DoCoMo had interesting new technologies on exhibition (check the glass-less 3D display with haptic feedback) but cannot get rid of the “Galapagos effect”: miles ahead in technological advancement, incapable of exporting it to the rest of the world. Source: DoCoMo stand & Sylvia Elaluf-Calderwood with her perceptive “Galapagos” observation.

It happened at the Mobile Venture Forum at the Mobile World Congress in Barcelona:

a VC panel with David Weilden ( Koshla ventures), Martin Gibson ( Accel Partners), Matt Murphy (Kleiner Perkins Caufield & Byers) and Roberto Bonanzinga (Balderton Capital) was moderated by Roy Vella and shared a glimpse of how VCs view the mobile world of opportunities from mobile advertising, to mobile health, Machine to Machine communications and Near Field Communications.

Shyam Kamadolli of Fidelity Growth Partners India has beaten me to it and already provided a full account of the panel discussion in his blog.

An open and good discussion which could have been even better had the mobile operators joined the panel too; we did not get to hear their side of the story why startups (and their VCs) find it so difficult to identify the operators’ platform APIs as well as their “corporate APIs” (whom to talk to).

Between the panel discussion and the well-attended reception later in the afternoon, there was a 3.5 hour marathon of 15 presentations from VC portfolio companies; although long, the session was sufficiently interesting to keep us in our seats.

DesignArt Networks(Niel Ranson) the fabless semiconductor company which delivers integrated System-on-Chips for the next generation multi-gigabit mobile broadband infrastructure.

Rob Keve of the London-based Fizzback for realtime customer feedback and customer experience solutions (and his interesting bell-curve distribution of general customer conversation or “noise signal” and refraction model for customer-feedback induced action).

CommProve ( Lars Pedersen) the probe-based network management tool for wireless operators.

Stoke Inc (Vikas Varma) the mobile broadband gateways which helps carriers manage the ever-increasing load of mobile data.

Gogii (Austin Murray) and the creators of textplus the new generation of text messaging ( who said SMS is dead?) from the same people who created JAMDAT mobile.

LiveUK  (Ariel Galinsky) for real-time video that enables broadcasters to uplink and transmit videos live instantly, anywhere and at anytime.Waze ( Noam Bardin) the social GPS where driver-generated traffic updates and mapping is used to optimise routes in real-time.

Rebtel (Andreas Bernstrom) (I was one of their first customers before they started producing nice-looking account reports and invoices) a VoIP for mobile phones.

MobileAware (Armin Gebauer) a platform technology enabling companies to launch mobile solutions ( commerce, self-care, web) fast.

Zong (Nick Mackivleen) the mobile payment service used by online gaming and social networking web sites.

Movirtu (Nigel Waller) the Mobile Industry Management solutions which brought Cloud phone, the service that broke the link between physical identity and SIM cards enabling mobile operators to reach 1bn people who earn less than $2 per day.

WeFi (Eran Naveh) a wi-fi discovery and connectivity tool for consumers (84m plus wi-fi hot spots discovered to date)  and a tool for operators to managed and offload data on wi-fi networks.

PerfectoMobile (Eran Yaniv) a cloud based testing of mobile services & applications on real devices.

NewBay (Paddy Hoahan) s/w platform for device-makers and operators to offer cloud-based digital content services to the end-user.

Christina Chen from DN Capital and I were asked to talk at a UK Trade & Investment Seminar Programme inside the Mobile World Congress 2011 in Barcelona about the challenges that entrepreneurs face in today’s UK fundraising environment.

Rather unusually for representatives of the two communities, VCs and angels, Christina and I agreed that this is the dawn of a new era for entrepreneurs. A new taxonomy is emerging with the  “superangels” taking centre stage, angel investing being recognised  as an asset class  & venture accelerators making good progress. It brings closer the VC and angel communities – with the former launching (in)formal “seed programmes” – and creates a richer ecosystem for startups.

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