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Mobile Internet Exit Returns Reach $93B In The Last 12 Months

The Mobile Internet sector is proving to be one of the hottest sectors of growth in the tech industry. Whilst the exit of WhatsApp to Facebook is the most obvious manifestation of this upwards trend, new data from Digi Capital shows that this is merely the (impressively large) tip of the iceberg. The data released in Digi Capital’s report shows an astonishing leap from $9.3B in exit returns 2 years ago, to $13.7B the next year, to $93.7B in the last 12 months. This last jump represents a leap of almost 7x growth from the previous year, helping to show the enormous potential in this sector.

The hottest sectors within mobile internet were Messaging, Games and Social Networking. The Messaging sector saw the highest exit returns, with $25.8B, although Facebook’s acquisition of WhatsApp was responsible for $21.8B of that. The Games sector saw the next highest, with $18B in exit returns, and without the outlier of the WhatsApp acquisition, that makes it the strongest sector, closely followed by Social Networking which saw $17.7B in returns. As the below graph shows, 2 other sectors, Food & Drink and Lifestyle also made over $5B in exit returns, as well as another 9 sectors returning over $1B, showing that the current growth is spread between different sectors, and not just focussed on a few.

Multi-Billion dollar exits are obviously good headlines, but the VC and growth equity investors are more interested in the exit returns. Rather than purely looking at how many dollars are received, the important figures are the amount of dollars returned for every dollar invested. As the report states, early stage investors typically hold on to their investments for at least 3 years, and the 3 year average return on investment for mobile internet up to q3 2014 was 3.5x. As the below growth shows, however, in a number of sectors, including the aforementioned Messaging, social networking and Games areas, growth far exceeded this average.

Digi-Capital’s report ends with a quote from the Managing director of Digi-Capital, Tim Merel, which forecasts further good news for those investing in, or creating Mobile Internet companies. According to Merel, Digi-Capital’s analysis indicates that “the next 12 months could be even more rewarding”.

Mobile Internet Sector Sees Record $19.2B Investment Over The Last Twelve Months

Mobile Internet companies saw a record $19.2B investment in the year up to Q3 2014. This represented a substantial and exciting growth of 232% compared with the corresponding year up to Q3 2013. The largest investments were in the mCommerce ($4.2B), Travel/transport ($3.3B), Utilities ($1.8B) and Games ($1.1B) sectors, but as the below graph shows 10 other mobile internet sectors also raised over half a Billion dollars each, showing that the growth in investment is spread fairly evenly, rather than in one specific direction








Further analysis shows that Institutional investors have been rewarded for their faith in mobile internet, with Digi-Capitals Mobile Internet index of 78 public companies in and around mobile internet giving an average 28% return in the last 12 months. The graph below shows that there has been especially strong returns in the travel/transport, social networking, messaging and gaming evenly, rather than in one specific direction.

Digi-Capital have also created a quadrant highlighting opportunities where revenue outperforms investment/consolidation activity. According to the graph, there are major opportunities in mCommerce, Appstore/ Distribution, Advertising/Marketing, Enterprise/B2B, Wearables, Business, Eduication and Books. Hidden gems include Navigation, Games and Entertainment, and there are exit opportunities in Social Networking. Selective opportunities are also available in Health & Fitness, Music, Photo & Video, Messaging, Lifestyle, Travel/Transport, Utilites and Finance. This shows that throughout the varying segments in the sector, there are possibilities to make good investments, rather than one sector more obviously dominating. This can only be good news for the Mobile Internet sector.

Tim Merel, the Managing Director of Digi-Capital, sums up this positivity around the Mobile Internet sector by pointing out that “There have been lots of big numbers already, but for Mobile Internet investors the best is yet to come”.

Forsyth Group Places CEO at Styloko

Styloko have announced the appointment of a new Chief Executive, the former ShopStyle Managing Director, Shannon Edwards.

Edwards has a strong background in the online fashion retail space, having joined ShopStyle in 2008 and launched the business in the UK, followed by France and Germany in 2009. Under her leadership, ShopStyle grew the customer base to more than two million monthly unique users, with over 3,000 fashion brands and retailers. Prior to that, Edwards was a director at eBay’s, where she led the sales and communication teams across the US and EU in San Francisco and London.

Styloko have gained a Chief executive with a wealth of global experience, and a great track record of success. Edwards will help Styloko to grow the business globally, and strengthen and forge relationships with retailers.

The Forsyth Group assisted Styloko with this search, and Shannon is the third executive we have placed with the company.

Megadeals Drive Gaming Sector Growth

Our friends at Digi Capital have created a report on the upwards trend of investment in the Gaming sector, which we see as further evidence of the thriving tech market.

5 “Billion Dollar” deals have driven the gaming sector to double the whole of 2013’s investment statistics purely in Q3 2014. Without these 5 deals, games acquisitions are running at similar levels to the previous record year in 2013. This shows the growing momentum and growth in the gaming sector, with the “red letter” deals adding to an already thriving sector.

The Forsyth Group is seeing significant demand in this sector and has made CEO, VP and NED  placements in the games sector for companies like, and

Data Courtesy of Tim Merel from Digi-Capital.

5 “billion dollar” deals

The biggest deals of the year so far:

  1. Microsoft/Mojang ($2.5B at 8x revenue and 20x profit): a long term strategic investment to nurture the Minecraft community for Microsoft’s future cloud, mobile, virtual reality and wearables platforms (see more analysis).
  2. Facebook/Oculus ($2B at reported 87x revenue): a long term strategic investment in the potential of virtual reality as a growth platform.
  3. Giant Interactive take private ($1.6B at 8x revenue and 12x operating profit): Giant’s Chairman and financial backers take advantage of the current phase in the investment cycle, betting Giant is more valuable as a private company.
  4. Amazon/Twitch ($970M at reported double digit revenue multiple): Amazon accelerates both its video and games initiatives, while also scoring a competitive win.
  5. Zhongji/FunPlus games assets ($960M): Chinese industrial conglomerate buys its way into the future, providing the remaining FunPlus team with financial firepower to reinvest in mobile.


American and Chinese buyers dominate

Consolidation firepower has shifted dramatically during 2014, with an even split in the top 10 games acquisitions between US (5) and Chinese (5) acquirers. This rebalancing looks very different to 2013 when 9 of the top 10 were by Chinese and Japanese acquirers, up from 8 out of 10 from Asia in 2012. The companies being bought come from all over the world (US, Europe, China, Japan, South Korea), so entrepreneurs and investors wanting a good exit need relationships across America and Asia. Europe has been more of a sellers’ than a buyers’ market in recent years.

Games investment returns >11x to Q3 2014

Returns to games investors from exits are >11x the amount invested to Q3 2014, comparing acquisitions to investments so far this year (excluding IPOs, which push returns even higher). While there is a time lag between investments and exits, comparing money flows by year helps track where the market is going.

Games investment returns hovered around 3x to 4x until 2007, plunging to 1x to 2x for 4 years after the financial crisis in 2008. As mobile disruption accelerated in 2012 just 5 years after the iPhone launched, games investment returns rebounded to 5x to 6x, before skyrocketing to >11x this year. Large deals always impact market returns, but there is a consistent upward trend even without them.


Investment appetite in FinTech and FashTech

A report created by our friends at Ascendant Corporate Finance reveals some fascinating facts and statistics about current investment trends in the UK (article below), naming FinTech and FashTech as two of the biggest internet sectors VC’s are pouring investment into.

Between January and June this year, 22 FinTech businesses received just under £300m from investors – more than the combined totals for Software and Cleantech. We have recently completed a number of assignments in the FinTech sector, for companies which are disrupting the retail banking and payments space. Furthermore, we have been extremely busy placing senior-level candidates for FashTech clients, a space for which VC’s have an increasing appetite when it comes to investing. Although this sector has yet to achieve “the scale that requires the type of ‘super investment’ (ie >£10m) deals that are more common in FinTech”, there are larger investments being made into FashTech companies, such as FarFetch which has raised £39m to date. This suggests that this may be about to change.

Our clients in FinTech include CapitalAid, Meniga and Inpay, and in FashTech our clients include New Look, Goop and Styloko.

Data courtesy of Stuart McKnight from Ascendant Corporate finance.

Investment Trends in Q2 2014

The simple headline is that in Q2 2014, £320m (vs £192m in Q2 2013) was invested in 84 deals (69) of over £0.5m by 117 investors (82).  These deals bring the totals for the year to date to £856m (£479m) and 170 investments (128).  This represents 93% of all funds invested in the whole of 2013.

The clear phenomenon of 2014 (so far) has been huge growth of investment in internet/mobile service companies.  In the first six months of the year, £520m was received by 92 companies in the sector.  This compares to £259m invested in 91 internet service businesses for the whole of 2013.  In 2014, London has completely dominated the sector taking 88% of funds invested and 79% of number of deals.

The biggest single subsector in this internet group is “FinTech” – financial technology.  Between January and June, 22 of these businesses received just under £300m from investors – more than the combined totals for Software and Cleantech.  In many ways this simple statement underlines the major shift that has occurred in the VC market over the last 5 years.  In 2009, Cleantech took twice the amount of VC money that all internet service companies received.  In 2014, investors have new priorities…

Other than FinTech, the only other major grouping amongst internet service investments was in fashion/retail companies.  We tracked 16 of these who received £85m.  So whilst “FashTech” is a popular area for investment, relatively few of the businesses have achieved the scale that requires the type of “super investment” (ie >£10m) deals that are more common in FinTech.

•           In Q2 2014,  £320m was invested in 84 deals by 117 investors

•           In the year to date, £856m has been invested in 170 companies

•           The busiest investors were MMC, Scottish Investment Bank, Index Ventures, Archangels, Balderton Capital, Forward Partners and Imperial Innovations

•           75% of deals involved more than one investor

•           Private investors participated in 37% of VC deals, US investors in 10%, Euro investors in 8% and Corporate Investors in 15%

•           The 14 biggest deals received 55% of funds invested, included: Farfetch (£39m), Nutmeg (£19m), Ebury (£18m), MyOptique (£16m), Transferwise (£15m), Brandwatch (£13m), Nujira (£12m), Roli (£8m), Ticketscript (£7m), Osper (£6m), Aveillant (£6m), Brightpearl (£6m), Citymapper (£6m) and Currency Cloud (£6m).

•           Internet/Wireless Services companies received £180m, Software £65m and Cleantech £17m. £60m was invested in companies that could not be simply categorised

•           In the Internet/Wireless Services sector, 40 companies received investment, Farfetch (£39m), Nutmeg (£19m), MyOptique (£16m), Transferwise (£15m), Osper (£6m), Citymapper (£6m) and Currency Cloud (£6m) received the biggest VC cheques

•           The largest Software deals were: Ebury (£18m), Brightpearl (£6m), Certivox (£5m) and Intent HQ (£5m).  20 Software companies received VC backing

•           Just 5 Cleantech companies raised capital: Cylon Controls (£6m), E-Leather (£5m), Nova Innovation (£4m), Netthings (£1.3m) and Celtic Renewables (£1.2m)

•           Outside of the key subsectors, the biggest deals were: Roli (£8m), Aveillant (£6m), MCor (£5m), Nualight (£3m) and Masabi (£2.5m)

•           London and Scotland which were responsible for 52% and 11% of deals respectively

•           London’s share of the VC money was down from its peak in Q1 to 65% of all funds invested in the UK and Ireland.

•           On a city-by-city basis, 45 London tech companies received VC, 8 in Edinburgh and 6 in Cambridge. All other cities or towns had less than 5 deals.


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