The 9 best exit returns in mobile internet

November 5, 2014

Mobile internet exit activity via trade exits (i.e. M&A) and IPOs rocketed 7x to $94B in the 12 months to Q3 2014, with mobile internet revenue forecast to hit $700B by 2017, 32 “billion dollar” mobile internet companies now worth $163B, and over $19B invested in mobile internet in the last 12 months. The massive Facebook/WhatsApp acquisition made the biggest splash, but a hot IPO market took 39% of all exits (50% excluding WhatsApp). “While these big numbers are all impressive, the exit returns (i.e. how many dollars you get back for every dollar you invested) are even more so. 9 mobile internet sectors returned up to 15.6x all the money invested in them over the last 3 years,” said Digi-Capital Managing Director Tim Merel. (See all research in free 48 page summary and full 538 page Mobile Internet Investment Review Q3 2014 at www.digi-capital.com/reports)

Mobile internet trade exits and IPOs (last 3 years) 5 sectors deliver over $5B to investors, another 9 sectors over $1B

5 mobile internet sectors delivered over $5B total exits in the 12 months to Q3 2014, including messaging ($25.8B or $4B excluding WhatsApp), games ($18B), social networking ($17.7B), food & drink ($7.7B) and lifestyle ($5.1B). Another 9 sectors saw over $1B total exits, with utilities ($3.3B), music ($3.1B), enterprise mobility/B2B ($2.4B), finance ($2.3B), advertising/marketing ($1.7B), travel/transport ($1.3B), photo & video ($1.2B), navigation ($1B) and mCommerce ($1B). (see all 27 mobile internet sectors’ exit analysis in full Review)

Mobile internet trade exits and IPOs (last 12 months) 

The 9 best exit returns in mobile internet

Multi-billion dollar exits via M&A or IPO are impressive, but VC and growth equity investors (and their institutional backers) care more about exit returns. So rather than how many dollars you receive, focusing instead on how many dollars you get back for every dollar you invested. Early stage investors typically hold investments for at least 3 years, and the 3 year average return on investment for mobile internet to Q3 2014 was 3.5x. However that average only analyzes total cash into and out of all 27 mobile internet sectors (where individual company investment returns can be both higher and lower), so it’s important to look at each sector individually.

Mobile internet exit returns on investment

The 9 best mobile internet sector 3 year exit returns to Q3 2014 were navigation (15.6x), messaging (15.4x or 2.7x excluding WhatsApp), social networking (15x), lifestyle (11.4x), games (9.9x), appstore/distribution (9.1x), food & drink (6.7x), music (4.4x) and entertainment (3.5x). Although shorter than the typical investment timeframe (as most investors don’t exit within a year), mobile internet 12 month exit returns to Q3 2014 accelerated dramatically to average 4.9x, with individual sectors returning up to 36.9x on that basis. (All 27 mobile internet sectors’ 12, 24 and 36 month exit returns detailed in full Review)

“After a bountiful year for mobile internet investors, our analysis indicates the next 12 months could be even more rewarding,” said Merel.

This is the third part of a three parts series for Q3 2014:

  1. 32 “billion dollar” mobile internet companies worth total $163B added $11B value in Q3 2014 ($125M a day);
  2. Mobile internet investment: record $19.2B invested, stock market sectors return up to 78% in last 12 months; and
  3. The 9 best exit returns in mobile internet: $94B exits in 12 months to Q3 2014, up to 15.6x VC/growth equity return on investment.

About Digi-Capital (www.digi-capital.com): Digi-Capital advises mobile internet, games and digital clients in America, China, Japan, South Korea and Europe for investment banking (M&A, investments), management consulting (strategy, due diligence) and industry research (mobile internet, games)