Angel Investors Participating Deals with iPhone Application Companies

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Startup ventures developing applications for the iPhone platform are apparently the hottest technology companies receiving angel financing.

When iPhone applications were initially released in the middle of 2007, there were only about 500 available for download. In 2010, the billionth download was completed from the App Store.

The number of applications on the App Store is estimated at more than 50,000. Of course many of these were developed by established companies or individual hobbyists. But the majority are applications built by new companies expecting to develop a scalable business around the iPhone platform.

Some sources identified just 16 of these operations as attracting over $120,000,000 of combined angel and VC funding in 2010. This compares to $102,490,000 in the preceding year and $37,690,000 the year before. These are companies whose core business is development of iPhone applications, not simply companies that create internally a single iPhone app for use with a specific business. Leading venture capital firm, Kleiner Perkins Caulfield & Byers, led the pack with $50 million committed among 6 startups.  That is mostly a consequence of firm’s 2008 launch of its $100 million iFund, which has the specified objective of funding companies in the iPhone app market.

Nearly 60 percent of the deals in 2010 were solely funded by VCs. About 18 percent were financed by angels alone. VCs and angels partnered in about one-fourth of the investments in iPhone and iPad startups. Not surprisingly, a larger amount of money was supplied by the VCs. But the participation of angel investors shows their growing position as a pathway to VC funding.

As sales of Apple’s iPad begin to rise, more applications for that device are expected to follow. The 220 percent growth rate trend in funding of iPhone and iPad application developers shows no signs of slowing.