We at Tandem bet the farm on mobile back in 2011, and we feel even better about this decision as we enter 2013. Per Mary Meeker’s oft-cited report, the world’s 1.1B smartphone users still comprise only 17% of mobile subscribers. This user base has tripled mobile Internet access in just the last two years.
Riding this wave, Tandem has invested $200k each (and six months of active, on-site mentoring) in 15 early stage teams from around the world over the last 5 quarters. And we’ll select another 3 from the founders who apply by this January 7th.
But as bullish as we are on the overall consumer mobile space, clearly not all opportunities are created equal.
While the strength of the founding team is our most important evaluation criteria, we also place great weight on the market each company is pursuing. Some startups may be too early, and some too late. Some appear to be entering overly saturated markets. Others are going up against powerful incumbents.
Tandem looks for that perfect combination of a superb product team going after a massive, relatively open market that is now ripe for disruption. As we evaluate incoming opportunities, we remain very open to innovative entrepreneurs who frequently convince us of their visions. But we still find it worthwhile to think hard about the odds of success in each market, especially given the huge opportunity cost for investors and founders when they choose to pursue a specific area. So, as we enter the new year, I thought it would be interesting to reflect on a subset of the market opportunities that pass our screens as more and more entrepreneurs apply to Tandem.
I should also note that this list relates to U.S. market opportunities only. Each emerging market really needs its own list, as certain crowded spaces within the U.S. remain wide open in other regions for that team that can deliver a simple, elegant experience to meet the needs of consumers there. In fact, these international markets present a very exciting opportunity for Tandem, as we observe the winners and losers in Silicon Valley and use the learnings to pursue greenfield opportunities elsewhere around the globe.
Too Crowded/Too Late:
• Casual, social gaming – For every Rovio and Supercell, there are of course thousands of unknowns (this still leaves open more targeted plays; see below).
• Cross promotion app platforms – there are quite a number of these already, and even the leaders will have to evolve to provide more value, quickly.
• Device synching – We backed ZumoDrive (now owned by Google via Motorola), but all the big players are now squarely focused on the problem.
• Location-based social networking – somebody will eventually make this work; and there are still hundreds trying…
• Jobs/Recruiting – big spending continues to attract LOTS of entrepreneurs, but how much disruption is left here?
• Mobile casino – We got in just before the window closed with Bash Gaming.
• Merchant loyalty services – the daily deal sites pivoted to this (and we all know how many of those are out there).
• Mobile ad networks – There’s tremendous opportunity around mobile advertising, but it’s not enough to be the middleman.
• Mobile ad targeting – See the 1990’s and 2000’s; how many winners emerged in the traditional Internet world?
• Mobile analytics – As a builder of mobile consumer businesses, I love to see a steady stream of these companies; but I find it tough to build something big here amidst all the noise.
• Personalized news platforms – it’s fascinating to me how so many are trying to do something here. Why?
• Photo sharing – enough said.
• Workplace collaboration – I’ve always found it a challenge to grow services that require many people to use them to have value. Now, it’s even more difficult with so many existing players. And yes, I know most of the services still suck…
• Many more…
• Car-based apps and services – I love that the auto companies are pouring money into startups, but there’s no reason to build for them just yet; the most popular mobile apps will get integrated into the cars first anyway.
• Mobile wallets – It will happen; but we’ll measure progress by how many more calendars it takes. This should probably go under the “too expensive” category for us as well.
• Integrated TV apps – People still spend a lot of time there, but behavior is locked (this still leaves big second screen opportunities – see below).
Too Expensive (for us at least)
• Mobile payment systems
• Traditional education platforms
• Enterprise software
• Everyday Apps – Evernote fixed Notes; how about Calendar? Contacts? And there’s more…
• Kid apps and platforms – I like to think beyond just games and books.
• Mobile developer platforms – Developers always need to boost their retention and monetization (figure out how you can help them beyond ads and analytics).
• Personalized tablet magazines – I’m excited about all the innovation that will happen here in just the next year (but let’s go way beyond news!)
• Rich messaging – what is next beyond sending texts and photos?
• Second screen – This is what will change the TV experience over the next 2-3 years (but it should extend beyond sports betting)
• Sound-oriented businesses – audio is an underutilized feature of the smartphone, and I’ll leave it at that (this doesn’t include music subscription by the way!)
• SMS marketing – So much is done around email despite its decline, and yet the companies on the growing SMS side still seem to just be scratching the surface.
• Tablet commerce – Already crowded, but still so much opportunity left on the table.
• Targeted mobile gaming – Mid- and hard-core games are still in their first generation and do not need tens of millions of users to get very profitable.
• Vertical content aggregation – I think of the best parts of Pinterest and Houzz made for the Post-PC world around all sorts of categories.
• Wearable sensors – It’s late for fitness, sleep and vitas, but there’s still a lot of meat left on this bone.
• Many, many more – Barely a day goes by that we’re not wowed by someone who’s figured out a creative way to disrupt an existing market. All it takes for us to believe is a small glimpse of that experience that blows us away, and we can then begin riffing on all the possible routes for massive growth from there.