Tim Lee of Sequoia Capital: Future of smartphone businesses

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Recently Tim Lee of Sequoia Capital, a venture capitalist fund, spoke with developers at Dophin Browser’s San Francisco location about the future of smartphone companies. The current generation of smartphones, touch screen mobile devices, is an emerging technology that only gained traction within the past 5 years because of Apple iPod and iPhone. Of course mobile devices were around then, but there was no central distribution of apps or central platform to run WAR apps on mobile devices; consequently, the marketplace for mobile apps was minor.

Now we are 5 years later in the smartphone industry. The potential to use smartphones in new and innovative ways is only scratching the surface given the unused sensing capability of these devices, such as camera, tilt, and GPS. The types of companies that have leveraged the smartphone platform successfully are tools and games. For example, Evernote successfully made a business from a simple concept of notetaking.  Zynga and Pocketgems are able to make successful games companies because people like to play games during their spare time. Success for smartphone apps is measured currently by daily active user and weekly active user, but it is also important to track user retention.

Tim Lee also provided some suggestions for evaluating success. Success for a business is cash. Indicators of success for a company are press articles, user base, hype, and “valuation.”

Tim Lee suggests that going forward we should look at the last generation of new disruptive technology. He takes the analogy of the Internet’s emergence and disruption of brick-and-mortar stores. Dell was successful in capitalizing online sales. New businesses such as eBay and Amazon emerged from the Internet. Enormous opportunity for creating businesses on smartphones still remains. He recommends that entrepreneurs should find an authentic idea, which is not something published in a newspaper; identify a pain point; or find new productive uses cases. The test of whether an individual should pursue a company is not because of funding that one can receive but of the 1-2 years time commitment to build a company — where time is linear. Entrepreneurs also have to sell their dream to get other people onboard.

When asked by the audience about mobile advertising, he believes that ads on mobile devices are rudimentary. Admob uses mobile banner ads, but this is a carry over from web advertising and may not suffice for a smaller screen.

Tim Lee is a Master’s of Electrical Engineering and MBA. He has been growing smartphone businesses for the past 5 years.