One area where I have seen too many mobile companies fail is that of being unable to secure later round venture capital funding. It may have been that the companies were doomed to failure anyway but I can’t help but question whether, in some cases, using venture capital itself became a failure factor.
The first problem is that too many VC rounds dilutes the value of shares. The original owners of the idea or employees with shares see their ‘investment’ become less and less with time until it becomes, as one past colleague of mine said "not worth working for".
In the current economic climate, there’s less VC money about and mobile companies are starting to fail due to a lack of VC money for further rounds rather than based on a true assessment of their viability.
I also believe some mobile projects, by their very nature, are small projects and just don’t need the minimum (millions) required by VC funds to make an investment. This encourages companies to be larger than needed. Larger companies tend to be less flexible and maintaining the largeness in itself ends up being a cost. This means that time and money is wasted on resources that really aren’t needed, particularly early and mid-project cycle.
I have worked on a few projects that run with a few developers, one maybe part-time CEO type person and other resources outsourced as and when required. These companies are fed by angel or private funding at levels more suitable for longer term survival. The angels are usually wealthy individuals or in one case I have seen as an offshoot of a VC funding firm. The inventors retain significant ownership in their ideas and continue to innovate and evolve the product over a considerable period of time. Having no external influence from someone on the board of a VC also gives the company more flexibility.
In order to grow, these companies eventually seek investment from partners who have more to offer than just money and the usual business expertise. These partners are typically network operators, handset OEMs, companies with complementary products or the established Internet service providers.
Clever entrepreneurs get more from their investors than just money. They can get a route to market.