Mobile investing: Angels and big VC firms converge on capital-efficient deals

As mobile applications and startups become less pricey to fund, big investment firms are overlapping more and more with Silicon Valley angel investors as their funds and deal sizes shrink.

Today’s “Smart Strategies for Mobile Investing” session at MobileBeat2010 reflected this new convergence, fielding two distinguished angels, Jeff Clavier of SoftTechVC, and Aydin Senkut of Felicis Ventures, as well as a representative from one of the best know tech venture capital firms in the world, Matt Murphy from Kleiner Perkins Caufield & Byers’ iFund.

KPCB’s creation of the $200 million iFund, in general, is indicative of bigger funds adapting to shifting industry landscapes. The goal of the initiative is to fund more experimental products built for the iPhone, iPod Touch and iPad, like social networking, mobile commerce and health care applications.

“What’s happened over the last year is that venture capitalists are going down-market while angels are moving upmarket, and they are starting to overlap,” Murphy said. “We’ve been more active to invest alongside these guys, to accept whatever risk and say, ‘let’s see what happens.’”

Clavier, who has invested in mobile plays like Seesmic and Mob.ly, agrees that this is where investing in the space has been heading, which has created more opportunities for collaboration than competition so far.

“In 2004 and 2005 there was a vacuum in the market, so we started investing as individuals,” he said. “And as we scaled, we started investing in five, ten, twenty deals. People were interested in this new market. Superangels really came out of this natural progression.”

Now that the costs of proving some technologies have fallen below $500,000, VCs and angels alike can allow themselves to make more, and riskier bets, he added.

“In mobile, with massive fragmentation, the angel model makes a lot of sense,” Murphy said. “Back in the day, [Kleiner] mapped out 10 verticals and invested in eight of them, now there are so many interesting apps in each of these verticals. Now we just say, ‘well, it’s a Darwinian environment, let’s give $500,000 and see where it goes.’”

Senkut, who often partners with Clavier, in investments like Wildfire Interactive, Foodzie and Mob.ly, says he sees another trend running parallel to the entrance of more angels: an increasing number of investors who are also founders.

“Every founder I see is smarter about these things and looking on the more operational funding side of things,” he said. “At all fund sizes, there are different possibilities for exits, and investors have to be fully aligned with founders anyway.”