Social 2.0 – Investors hunt among mobile start-ups for the next big thing

20 Feb 2013

Soundwave co-founders Aidan Sliney, Brendan O'Driscoll and Craig Watson

Despite Facebook’s tepid IPO in May last year, all eyes are on an inevitable IPO of microblogging site Twitter within the year. But judging by venture capital activity in recent weeks where new mobile-first social networks built on apps like Snapchat and Keek are attracting substantial Series A funding rounds, it is clear investor appetite for the next big thing is far from sated.

But what will the next big thing be? The key to finding the answer to this question may be Facebook’s much-trumpeted acquisition of Instagram for an apparent US$1bn (later revealed to be US$715m) in April last year, just prior to its IPO.

Instagram wasn’t a website, it was an app on the iPhone that allowed users to share photos and add cutesy filters to delight their hipster friends. But it was more than that: it was a social network in its own right.

Now a new generation of social networks that, like Instagram, begin as apps on iPhone or Android devices are all the rage among venture capital firms.

Mobile social ventures

Last week, a start-up called Snapchat raised US$13.5m from Benchmark Capital, valuing it as much as US$70m. Snapchat is a mobile app that allows users to send friends a message that after being viewed for a few seconds disappears. It is increasingly popular among teens and 20-somethings and every day 60m messages and photos are sent on Snapchat.

Typical of this new generation of start-ups, Snapchat is based outside Silicon Valley, on LA’s Venice Beach to be precise, and it was started by Bobby Murphy and Evan Spiegal two years ago as a counterweight to services like Facebook, where many people worry about their data never being deleted.

Another fast-moving next-generation social venture is Keek, a Toronto-based video-based blogging service that lets users record 15-30 second videos, and which just raised US$18m from a consortium of investors. Keek users upload 4m user-generated videos every month and 200,000 new users sign up for it every day.

Keek’s founder Isaac Raichyk describes it as a cross between Twitter, Instagram and YouTube.

Even Twitter is getting in on the app action; in recent weeks it launched a new mobile social network called Vine that lets users share videos in six-second loops.

In recent days, Talkbits, a Zurich-based start-up founded by St Petersberg-born entrepreneur Olga Steidl launched its social walkie-talkie app on the Apple and Google app stores in the US and UK.

Olga Stiedl

Olga Steidl, founder and CEO of Talkbits

Described by The Moscow Times as one of the top 10 Russian entrepreneurs to watch, Steidl raised US$2m for Talkbits in October after selling her previous venture SPB Systems to Russian search giant Yandex.

Steidl said she believes that the popularity of this new generation of app-first social networks is a reaction among smartphone users for more intimate, targeted experiences.

“If you look at Facebook – Facebook has achieved its goal. It is its own internet now. That’s why it needs search. But there is no single use-case or audience addressed by Facebook.

“People need smaller, more targeted networks with immediate response from the community and specific-use cases. Like Vine for video, Snapchat for pictures, Talkbits for voice. And Facebook will want this data. And users will not want us to give it all to Facebook. Users will have more apps on their phones, even more than now,” said Steidl.

In Dublin, a new start-up called Soundwave that typifies this new generation is raising funding. Founded by Aidan Sliney, Craig Watson and Brendan O’Driscoll, Soundwave allows smartphone users to source information about what music people in their “sound circle” are listening to by geographical location or venue.

“The future is mobile,” O’Driscoll said. “There are three times as many smartphones being activated every minute than there are babies being born. Our mobiles are the first things we reach for in the morning and the last thing we see at night.

“So it makes sense that if you are looking to be involved in an active, dynamic, ever-changing community that it takes place on the dynamic device that you have with you everywhere you go. I think that having different apps within a smartphone is a good way to differentiate and segment different communities that serve different purposes.”

Low barriers to entry

Social media expert Niall Harbison is co-founder of Simply Zesty, a firm that was bought by UTV plc last year for about stg£1.7m (rising potentially to stg£5m, depending on future trading performance). Harbison said one of the factors fuelling this new generation of specialist mobile-based social networks is the fact that the barriers to entry for creating an app are very low.

“It used to be a big deal if an app or web service could rack up 1m users but unless you have 10m-plus now you are not at the races. What we are seeing is a move to more instant communication. People don’t want to be tied down to things like email addresses, subject lines and all the formality that comes with traditional communication.

“While these apps are getting massive traction it remains to be seen if they have the staying power to retain users. Some of them are massively exciting and useful but they could just be fads before users move on to the next big thing.”

A version of this article appeared in The Sunday Times on 17 February

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years