Q1 2014 was a landmark quarter for venture-backed companies in the mobile messaging space on the both the exit and financing fronts. Not only did Facebook’s $19B acquisition of Sequoia Capital-backed WhatsApp weigh in as the largest VC-backed M&A exit of all time, venture financing deployed to mobile messaging companies in Q1 marked a five-year high in the space.
The growth of both venture capital and corporate funding to the global mobile messaging market has come as startups pursue an expanding number of segments and applications for mobile communication. Of note, Q1 saw investors pursue a number of deals to both enterprise messaging apps as well as ephemeral and anonymous messaging services promising private, encrypted and/or self-destructing data.
Mobile Messaging Financing Trend
Over the last four quarters, mobile messaging startups have raised $589.6M across 43 deals. On a year-over-year basis, funding to the mobile messaging market has grown 159%, thanks in large part to Tango’s $280M Series D led by China eCommerce giant Alibaba.
And Alibaba isn’t the only corporate interested in messaging upstarts. In fact, 19% of all mobile messaging deals in the last four quarters have included the participation of a corporation or corporate venture arm. A cross-section of the corporate-backed messaging deals over the last year include:
Wickr (Juniper Networks) – Provides a mobile app offering self-destructing messages, photos, videos & other media.
TigerText (TELUS Ventures, Reed Elsevier Ventures) – Encrypted real-time mobile messaging platform for the enterprise.
Rumr (Google Ventures) – Mobile messaging app enabling anonymous group messaging.
Snapchat (Tencent) – Self-destructing photo messaging mobile app.
Over the past two years, 49% of all mobile messaging deals have taken place at the seed-stage, while another 29% of mobile messaging deals have come at the Series A stage. Given the heavy early-stage deal activity, median quarterly deal sizes have trended under $5M. The jump in average mobile messaging deal size in Q1 can be attributed to Tango’s outlier mega-round as well as larger mid-stage deals to enterprise messaging startups including TigerText and CoTap, backed by Emergence Capital Partners and Charles River Ventures. The better metric to track given the outliers is the median round size which has remained largely flat over time.
In terms of geography, we see Silicon Valley has grabbed 34% of deals in the mobile messaging space in the last two years. But SoCal has developed a growing ecosystem of venture-backed messaging startups taking nearly 1/5 of deals over the period. International deals have also captured a significant share of financing including India-based Hike, which captured $14M in funding this April from Bharti SoftBank.
Below is a cross-section of different mobile messaging apps that have raised funding in the last year and have ranked in the top 1000 App Store category rankings. As the chart highlights, there are a handful of consistently top ranked apps and then many apps which are seeing significant ranking volatility.
For example, CoTap and Battery Ventures-backed Leo have seen large swings in the App Store category rankings in just the past few months. But others such as Eniac Ventures-backed video messaging service Glide has consistently trended in the top 20 ‘Photo & Video’ apps over same period.
A list of 10 early-stage (seed/Series A) mobile messaging companies currently ranked in the App Store top 1000 can be found on the ‘Research’ tab, after logging in to CB Insider. Note: This research is only available to subscribers with access to CB Insider.