Investing venture capital in wireless companies is at a turning point between money flowing to network-based investments and content-based investments, according to Tom Wheeler, managing director of Core Capital Partners and past CEO of wireless industry trade association CTIA.
Wheeler compared the changes in sources of wireless innovation to the evolution within the networks themselves. He said that just as networks used to be highly centralized and much of wireless innovation came from Bell Labs, both have evolved to the point where development is occurring on the edges of the network-and in small companies around the country instead of primarily at Bell Labs’ locations in New Jersey.
“What we have venture capitalists doing is funding the mini-Bell Labs of today,” Wheeler said. “It’s not the centralized, top-down tower anymore-it looks just like the network.”
Wheeler said that wireless VC investing essentially comes in two flavors: investments in the networks, which can include areas such as backhaul or software enhancements; and investments in content, which is enabled and carried by the networks.
Wheeler said he sees venture investing as being “on the cusp right now of shifting from the network to what the network enables,” although he cautioned that constant improvements in technology will always leave room for further network investments.
Content and advertising companies are drawing interest as part of the shift, he noted, as well as services such as mobile payments and banking.
Since investing in wireless covers many different areas, “Mobile is definitely a trend that will be here for awhile, but it’s also a diluted term,” said Tim Chang, principal with Norwest Venture Partners.
Chang said that the mobile sector is “actually one of the trickier sectors out there, because the value chain is so intricate.” Investors, he said, need to be acutely aware of dynamics within the industry such as the difficulty of getting onto a carrier’s content deck.
“It’s kind of like quicksand-nice and easy on the surface, but then you realize just how deep and tricky is goes,” Chang said. “If you’re going to do it, you have to focus and spend a lot of time.”
