Venture Capital Money Chases the Digital Home

Venture Capital money is once again investing in consumer technology companies -- though from the looks of some of these investments, is there a mini-bubble forming?

Menlo Park, CA (PRWEB) November 16, 2005 -- When you talk to investors that reside on Sand Hill Road, home of dozens of venture capital firms, you get the feeling that consumer technologies are coming back into fashion. This was evident at a recent conference hosted by Dow Jones in the San Francisco Bay Area where over 70 young consumer technology companies showed off their company to rooms full of investors and big name companies, such as Microsoft, Intel, Sony, NTT and Comcast.

What is happening? Back in the year 2000 there were 378 deals worth a total of almost $6 billion, according to Dow Jones VentureOne. Then the bubble burst, and only about a hundred deals worth less than a billion dollars came in 2003.

But, now a common sentiment heard amongst the venture capitalist is “we are starting to look at the consumer technology sector.” Often times these people are coming from a background of investments in information, mobile, and even biomedical technology. But, these sectors seem to have cooled off or have gotten too crowded. As one investor said, “When everyone figures out it is worth investing, it is time to get out, because it starts to get too expensive.”

Consequently, investors are quietly turning to the young and growing digital consumer sector.

The starting gun may have been fired by Intel when they announced their $200 million fund for Digital Home investments over a year ago. Overall, there were 169 deals worth $1.7 billion last year, and it looks like this year will match or exceed last year. Some big acquisitions like eBay’s purchase of Skype and News Corp’s purchase of Intermix Media (MySpace) have fueled the flames.

So, the stage was set for the 70 consumer technology company CEOs. Some interesting things were shown. One company, Upstream Engineering from Finland showed how they want to put a digital projector into your cell phone that is capable of shining your photos and videos onto a wall.

Another company, Pandora, has assigned 400 “music genomes” to each song in their catalog so you only need to point out one song that you like and a custom radio channel is instantly created just for you.

And there is ClickCaster, a company that wants to sell you a mini studio so that you can publish Podcasts for free to everyone in the world.

But, then there were over a dozen companies that offered their unique angle on making it easier to search for things on the Internet, and another dozen that wanted to make it easier for merchants to advertise. No one used the phrase “sticky eyeballs” this time, like they did in the first bubble, but there was a feeling that some of these companies won’t be around next year.

Bottom line -- there is a bumper crop of interesting ideas popping up, some of them cool and even profitable, and some of them ghosts from the last investment bubble. Either way, it was a conference full of energy.

A set of detailed notes from this conference are available at www.digdia.com.

About DIGDIA
DIGDIA is a strategic analysis and consulting company that specializes in Digital Home markets, the Digital Entertainment value chain and related technologies. Our mission is to help companies find growth opportunities in the Digital Home markets where strategy and technology can make the difference. Reports on Digital Hollywood, Digital Cinema, Digital Cable Ready, Digital Consumer Electronics and other topics may be found at www.digdia.com. Contact: Gary Sasaki, DIGDIA, 408-981-2288

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