Venture Funding Down, Overall Deal Flow Up for Boston Mobile Industry in 2009

Venture investments in Boston-area mobile technology companies decreased in both volume and value in 2009, plummeting to levels not seen since 2005. But payouts from mergers and acquisitions hit a record level, raising overall deal flow to an unprecedented $1.5 billion, according to data compiled by Mobile Monday Boston.

Venture investing started out strong in 2009, according to the report, with $208 million invested in the first quarter. But investors couldn’t keep up the pace. They doled out only $24 million in the third quarter and $40 million in the fourth quarter.

By year’s end, venture capital firms had handed out only $339 million, a decrease of 40 percent from 2008’s record figure of $565 million. The total number of companies in the region receiving venture funding also fell, from 45 in 2008 to 32 in 2009.

The drops—which were paralleled in other sectors, and likely reflect the venture industry’s own travails rather than any fundamental decrease in venture-fundable innovation—brought an abrupt end to a three-year run of increasing venture investments in the region’s mobile industry.

Even as the venture well became drier, though, a number of more established mobile companies were acquired, providing exits for their own investors. The value of acquisitions in the mobile business zoomed upward from $473 million in 2008 to nearly $1.2 billion in 2009, Mobile Monday Boston found.

A single acquisition, 72 Mobile Holdings’ $530 million purchase of Chelmsford, MA-based wireless broadband equipment maker Airvana, accounted for nearly half of the $1.2 billion total. Compuware’s acquisition of Lexington, MA-based Gomez, Prime View International’s acquisition of Cambridge, MA-based E Ink ($215 million), and KPN’s acquisition of Burlington, MA-based iBasis ($93 million) significantly boosted the numbers. (Apple’s acquisition of Quattro Wireless isn’t counted in the figures, since it was announced in early January; in any case, the companies haven’t disclosed how much Apple paid.)

Mobile Monday Boston organizer Kate Imbach, of Skyhook Wireless, presented the investment data at Monday night’s meeting of the group, and plans to detail them further at Xconomy’s Mobile Madness event today.

The report also detailed mobile investments by category. Hardware companies were the luckiest in 2009—19 percent of the 32 companies that won venture investments were in this category. Applications and software companies tied for second place at 15 percent each, followed by voice and advertising companies (tied at 9 percent each), and wireless infrastructure, content and RFID companies (tied at 6 percent each).

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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