Mobile Internet Startups
predicting the next big win
Sanjay Jhawar
Vice President, Wireless, cirlab!
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July 2001
The Parent: CIR Group
 CIR = Compagnie Industriali Riunite
 one of Italy’s most significant industrial groups, founded in 1976
 publicly traded in Milan (CIRX)
 FY2000 : revenues €2.52 billion, capital employed €1.05 billion, net income €86 million
 controlled by the De Benedetti family
 mission: create shareholder value through dynamic management of investment portfolio
and taking an active role in management of operating companies
 focus on media, utilities, telecom and automotive components
 some major telecom and new media investments by CIR:
 L’Espresso/Kataweb (49.6%)
 leading Italian portal with 256 million monthly page views & 6.6m unique users (March 2001)
 H3G (12.9%)
 3G wireless license winner in Italy, currently building mobile network.
JV with Hutchison Whampoa (who owns 78.3%)
 broadband access providers : eVia and CasaWeb
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De Benedetti Group Success Stories
(Hutchison, CIR)
• recently awarded 3G-UMTS operator license in Italy
• Europe’s largest wireless market with 73% penetration
(now part of Vodafone Group)
• established in 1994 within Olivetti
• 2nd wireless operator in Italy and Europe with 10+m customers, 43% market share
• largest value creation in Italy since WW II
(now owned by ENEL/Wind)
• established in 1995 within Olivetti
• the 2nd fixed line operator in Italy with +5MM customers
• acquired by Vodafone in Mannesmann takeover, recently sold to Wind for $6.5bn
Corporate Venture Capital Fund
• established in 1985 to focus on emerging technologies
• total investments for $200MM
• 29% IRR since inception, 35% IRR since 1992
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Who is cirlab?
 cirlab! is a seed and early-stage value-added venture investor founded in 1999
and funded to €30m by CIR Group, focused on
 wireless Internet services, applications and software technology
 digital media and broadband content
 other software and services
 Objectives
 invest in European, US and Israeli businesses where Europe is the major market
 exploit Italy’s mobile market size and our connections here and elsewhere
 be active partners in building the business, spending a lot of time outside of board
meetings working closely with management
 Team backgrounds
 seasoned entrepreneurs, technologists, marketers and finance professionals with toplevel operational experience in the US and Europe in our chosen sectors
 extensive personal networks in Italy, UK, US, France, Sweden, Israel and elsewhere
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cirlab! mobile portfolio
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Current outlook for mobile Internet 
 3G delayed, slow start to GPRS
 Operators with high debt and declining ARPU cutting all non-essential spending,
looking to share 3G radio access networks
 Nokia, Ericsson, Motorola, Siemens, Lucent, Alcatel cut earnings estimates,
downsize and cut back vendor financing.
 Comverse warns but so far nothing from Openwave.
 Market slump causing venture investment slowdown : many startups struggling
to raise money.
 European wireless startup investments (data from Tornado Insider):
 €171m invested in March
 €227m invested in April
 €127m invested in May
 €92m invested in June
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Active mobile Internet subscribers
DoCoMo
23.0m
BT Cellnet
1.5m
KDDI
7.2m
France Telecom 0.7m
J-Phone
6.7m
Telefonica
0.5m
Omnitel
0.1m
TIM
0.1m
Shinsegi (Korea)
0.5m
Sprint PCS
1.3m
Verizon
1.0m
AT&T Wireless
0.6m
Nextel
1.1m
Others
1.65m
Total
46.0m
Source: Motorola 5/01
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Current outlook for mobile Internet 
 Regular mobile Internet users in Europe growing from 2.5m in 2000 to 170m in
2004 (Forrester, 9/2000)
 GPRS commercial network launches in several countries, many in soft launch
 GPRS smart phones finally coming at the end of this year to Europe?
 NTT DoCoMo on track for October 3G commercial launch
 High hopes for XHTML (WAP/iMode convergence), Java phones, instant
messaging, MMS
 Killer app is still mobile email – but now for enterprises. Momentum behind
standardised mobile middleware from IBM, Microsoft, Oracle
 2nd generation operator mobile portals rolling out
 European mobile ASP’s iTouch (UK), Acotel (Italy) & Aspiro (Sweden) had
successful IPOs in last 12 months.
 No shortage of VC funds waiting the right mobile investment opportunity
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Predicting the next big win
Complete solution
partners already spending big
money promoting the category –
but missing the piece that unlocks
the whole value chain they
bet their business on
Compelling business driver
buyers take risks to spend
money with a startup that was
budgeted elsewhere
Gatekeeper position
with few current competitors
and with technology and
other barriers to entry
End users actually care
solves a real (not imagined)
need. Structurally improves
value for money.
Go with the wind not against it
leverage long term
investments made by others.
Market timing is critical.
Advanced technology is not enough
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2.5G operators spend money on?
 Subscriber acquisition in highly penetrated markets and for
newer entrants
 Subscriber retention and ARPU protection for established
players
 Manage GPRS expectation gap – optimized applications
 Avoiding SMS > GPRS revenue transition issues
 Threat from internet portals – subscriber ownership
 Migration of legacy architectures to Internet accessibility
 Voicemail, IN, billing
 Working with their portal partners, introduce new applications on
Internet time yet integrate with an existing telecom architecture
 Integration of user experience across architecture
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3G operators spend money on?
 build brand - new technology image
 rapid time to market
 start generating cashflow asap to cover interest payments
 new entrants must get established before incumbents can migrate legacy systems
 fill bandwidth
 price to stimulate demand, maximum possible proportion of data revenue
 minimize costs of providing commodity voice services
 capture customers from 2.5G
 new entrants encourage number portability
 allow users to migrate existing services with better QoS
 new terminal types to support new applications
 reduce costs of software upgrades
 open services mode for new entrants
 differentiated middleware, external apps
 improve periods of under utilization
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Other motivated buyers
 MVNO’s
 Service differentiation without Radio Access Network
 Subscriber acquisition
 Cross branding tie-ins
 Well funded mobile portals and ASP’s
 Especially operator owned entities eg Vizzavi etc.
 Application integration with telecom services, to capture
operator revenue sharing
 Large enterprises
 Mobile office
 Mobile business process support - vertical applications
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End-user value-for-money
+
special device
personalized
dynamically
context aware
(relevant, appropriate)
airtime
community
value
entertainment
anywhere
anytime
productivity
urgent
extra monthly fee
Reduce airtime
needs, device costs

Allocate bandwidth
to higher value
services

Increase dynamic
personalization

Address intrusion

Careful with easy of
configuration and
use, intelligent
design for latency
etc.
personalization
content adaptation
difficult to configure
difficult to use
intrusion
-

delay
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cost
Value chain
location based services
 Still evolving
 Several pieces not yet in place
 Issues not yet well addressed
 cost of location sampling
 push services
 privacy/availability
positioning
location
technology middleware
CPS
Snaptrack
Cellpoint
Signalsoft
Xypoint
privacy &
proximity
availability
detection
control
InirU
iProx
Teltier
Personity
Phone.com
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app
platform
Microsoft
IBM
Sun
apps
Webraska
Akumitti
ItsAlive
GeePS
Airflash
uBmobile
transaction
and billing
Portal s/w
Geneva
Value chain
mobile advertising
 Early days
 Many pieces not yet in place
 Issues not yet well addressed
 privacy
 anti-spam
 reverse billing to advertiser, or credits to users
 balance between richness of media and cost of delivery
 integrating multiple touch points – TV, billboards, Bluetooth, web, print
brand
advertising
owners/
agencies
retailers
Nike
P&G
Starbucks
McCann
JWT
media
buyers
Initiative
Media
profile
targeting
Mediatude
Lumeria
context
privacy availability
awareness
control
control
(e.g location)
Privada
Ayeca
Angara
interactivity
Teltier
Personity
Teltier
CMG, Hiugo, Iteru
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content
transformation
Phone.com
IBM
Oracle
push
services
Phone.com
CMG
Ecrio
Airflash
Value chain
mobile media distribution
 Still evolving
 Several pieces not yet in place
 Issues not yet well addressed
 billing other than for traffic
 QoS
 broadcast and point-to-multipoint to reduce spectrum needed for distribution
media
creators
Disney
Atomfilms
CNN
Universal
BMG
Sony
digital
rights
mgmnt
Microsoft
content
transaction
transform
and billing
-ation
Real Networks
Microsoft
pt-to-pt,
multicast,
radio
broadcast equipment
gateway
Celltick
Fantastic
Ericsson
Nokia
Motorola
Streaming Lucent
vendors
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DSP
CPU
Client
software
Real Networks
ARM
Microsoft
TI
Motorola
Intel
Analog Dev
Technology Megatrends
 Signalling: telecom protocols >> Internet
 Parlay
 SIP
 OSA
 Internet megaservices – distributed component services, usable
by 3rd party general internet applications
 SOAP
 .NET/Hailstorm
 AOL IM, ICQ, Yahoo Messenger, MSN
 Mobile mass storage
 512MB compact flash cards
 1GB CF size microdrives
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Log(performance)
Moore’s Law not the whole story
Processor power
at constant cost
2X in 18mo
Hard disk storage
capacity at constant cost
2X in 12mo
1GB
340MB
9.6kbps
CSD
14kbps
CSD
Mobile WAN bandwidth
at constant cost: 2X in 30 mo
40kbps
GPRS
144kbps
UMTS
CSD
384kbps
UMTS
packet
2Mbps
UMTS
low mobility,
few users
Mobile WAN’s and 3G phones will be
client-server NOT network computers
t
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Insights for potential startups
Critical gaps needing solutions
 Cached media, overnight delivery, digital rights management
 Server management of rich clients
 Internet applications accessing telecom functions
 Integrated voice/visual interface; billing; network presence
 Quality of Service management on 2.5G
 IP multicast/broadcast over 3G
 Cross application megaservices
 application pre-rating
 proximity detection, cellular positioning and Bluetooth
 mobile media distribution over multiple operators:
a mobile “Akamai”
 dynamic personalization bridging internet and telecom
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