April 21, 2011 8:59 pm

DCM launches Android investment fund

A $100m fund has been set up to invest in start-up companies linked to Google’s Android operating system, in the latest sign of the rapid advances the software has made against Apple’s rival touchscreen devices.

Run by DCM, a Silicon Valley venture capital firm that has been an early investor in the Chinese internet, the fund draws most of its backing from Japanese investors KDDI, the country’s second-largest mobile carrier, and Gree, which operates a mobile gaming network. Tencent, the Chinese internet company which has recently started to make other online investments internationally, is also an investor.

The launch of the A-Fund echoes the iFund created by Kleiner Perkins, another Silicon Valley venture capital firm, in the early days of Apple’s iPhone. That investment vehicle, which now has $200m under management, helped to highlight the business potential in creating applications and other technologies for users of Apple handsets.

The decision to back Android reflects a belief that the long-term potential of Google’s open technology platform is greater than the more closely controlled one run by Apple, said David Chao, a partner at DCM. “History has shown over and over: the more open an ecosystem is, the better the products that come out of it,” he said.

Smartphones running on Android now outsell Apple’s iPhones, though the number of Apple devices in use is still larger due to the length of time they have been available. Mr Chao predicted that the use of Android in China would rise rapidly as the price of low-end handsets falls, with the cheapest devices falling to $100 or even lower by the end of the year.

The A-Fund is designed partly to tap the engineering talent in Japan and China that has already emerged around mobile applications, Mr Chao said. Until now, most of these developers have been constrained by the “walled gardens” of the mobile operators which have limited their reach, but the arrival of more open, touchscreen smartphones has created a new market, he added. About half of the fund is expected to be invested in the US.

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