Digi-Capital mobile internet Investment Quadrant: hidden opportunities

August 16, 2014

Despite mobile internet forecasts of $700B revenue by 2017, and records of more than $47B M&A and $14B investment in the 12 months to Q2 2014, deciding where to look for great opportunities can be hard for acquirers, investors and entrepreneurs alike. To make this easier, Digi-Capital’s mobile internet Investment Quadrant positions the different sectors in terms of investment potential and consolidation potential.

Investment Quadrant

How it works

The Investment Quadrant is looking for a relative mismatch between a sector’s forecast revenue and its investment and consolidation activity. In other words, if a sector looks like it will be big, and there are relatively lower investor competition and relatively more remaining exit opportunities, then that could represent a hidden opportunity.

The methodology compares three sets of numbers for each sector:

  1. Revenue forecast 2017F: Could it get really big both in absolute terms and relative to other sectors? Could you invest in a rising tide, which hopefully lifts all boats?
  2. Investment in the last 12 months: How competitive has investment been compared to other sectors? Could you invest in a blue ocean, not a red one?
  3. M&A in the last 12 months: How much consolidation has there been so far compared to other sectors? Could you invest for exit, or might it be too late already?

The underlying data is in our Mobile Internet Investment Review.

It’s important to note that this analysis does not tell you if any specific sector or company is a good or a bad investment. It is not an exhaustive analysis considering all factors, instead analysing the data purely in terms of revenue forecasts, investment and M&A. So buyer beware.

Mobile internet Investment Quadrant

The Investment Quadrant divides mobile internet into:

Major opportunities (relatively lower investor competition, relatively more remaining exit opportunities)

  • mCommerce
  • App Store/distribution
  • Business apps
  • Education apps
  • Productivity apps*
  • Wearables

Hidden Gems (relatively lower investor competition, relatively fewer remaining exit opportunities)

  • Enterprise mobility/B2B apps
  • Mobile advertising/marketing
  • Mobile games
  • Messaging apps
  • Navigation apps

Exit opportunities (relatively higher investor competition, relatively more remaining exit opportunities)

  • Lifestyle apps
  • Medical apps*
  • News apps*
  • Social networking apps
  • Travel/transport apps

Selective opportunities (relatively higher investor competition, relatively fewer remaining exit opportunities)

  • Entertainment apps
  • Finance apps
  • Health & fitness apps
  • Photo & video apps
  • Utilities apps

(* Sector doesn’t appear on the chart as M&A value for the last 12 months wasn’t available)

Some folks might see this as controversial, particularly if their company’s sector or investments don’t appear in “major opportunities”. Again this analysis isn’t saying that any sector, company or investment is good or bad, but simply compares data across sectors in a broadly consistent way. There could be great successes from any sector, and each opportunity should be looked at case by case based on the facts.

This is part 3 of a 5 part series:

  1. Mobile internet to grow over 300% to $700B in 4 years (revenue forecasts by sector)
  2. Mobile internet record deals >$47B M&A and $14B invested (M&A and investment analysis)
  3. Mobile internet Investment Quadrant: hidden opportunities (investment and consolidation potential by sector)
  4. The 5 drivers of $700B mobile internet (business models and metrics)
  5. Over 20 “billion dollar” mobile internet companies (competitive advantages and risks)