Mobile payments, advertising firms attract top VC dollars in 2011

Despite global economic woes, the venture capital world remains enamored with the wireless industry. In other words, it's a good time to be a startup in the mobile industry, particularly if you building a mobile app or creating a mobile payment solution.

In fact, 2011 was one of the bigger years for venture capital investment in wireless, with investments topping more than $6.3 billion, up from $4.5 billion in 2010 and $2.1 billion in 2009, according to research firm Rutberg & Company, which recently released its 2011 review of venture capital in the mobile industry. 

Not surprising, certain segments such as mobile commerce and mobile marketing/advertising attracted the biggest dollars last year. Mobile marketing/advertising garnered $592 million, up from $128 million in 2010. Meanwhile, mobile payments topped $558 million in investment, up from $276 million in 2010.

In an interview with FierceMobileContent, Rajeev Chand, managing director and head of research at Rutberg & Co., attributed the jump in VC investment in the advertising segment to the success of firms such as Admob, which Google (NASDAQ:GOOG) acquired for $750 million in 2009 and Quattro, which Apple (NASDAQ:AAPL) purchased for $275 million in January 2010. "Mobile ad budgets are still very small, but they are strong," Chand said. "Investors are seeing the underlying revenue growth for ad startups."

Consumer apps are still attracting VC money, however, one thing that has changed over the past year is that more of the companies attracting investments are actually starting to earn revenue vs. just attracting an audience. "Last year it was all about getting users and eyeballs," Chand said. "Today some of these companies are getting a quality level of revenues ... we are seeing some transition from eyeballs to revenues."

Click here to view select slides from the report.

Enterprise apps are starting to see some growth and Chand expects that this segment will attract more money in the next few years. "Enterprise apps are where the consumer app category was a few years ago. In 2011 it only represented $374 million but that was a big increase over $185 million in 2010," Chand said.

Another hot area for VC money is mobile healthcare. Rutberg found that VC investments in mobile health topped $356 million in 2011, up from $209 million in 2010.

When reviewing the report on 2011 investment, Chand said one thing that surprised him was the increase in strategic investors.  About one in five transactions in the mobile industry involved strategic investors. Some of the most active ones were Qualcomm Ventures, Google Ventures and Intel Capital. Chand credits this trend with the realization by larger corporations that they need to invest in mobile so they can be on top of trends and also have effective call options on acquisitions.

For entrepreneurs, the growth in venture capital in the mobile industry is clearly good news. However, Chand also warned that the company is expecting a narrowing or lessening of seed and angel investors in the coming year, which may make it more difficult for small developers to raise money that way. Nevertheless, it's good to know that innovation in the mobile industry is still strong--and there's VC money available to those with a good idea and strong business plan.--Sue