The popularity of the Android OS in emerging markets like China, where DCM invests heavily, can’t be overstated, and judging by the companies in the firm’s first A-Fund, the thesis seems to be working out.
Winners (or paper winners) from the first fund include: Augmedix, Eaze, Freee, KakaoTalk, Kuaishou, Life360, Playstudios, and Yik Yak. And by far the firm saw its best A-Fund returns from a relatively late-stage bet in Kakao, whichis now publicly traded in Korea with a $7 billion market cap (after merging with Daum in the run-up to its public offering).
While the idea for a mobile fund focused on the Android OS seems prescient now, there were no guarantees when the first fund launched in 2011. With co-investors including big Asian internet and mobile giants like Tencent, KDDI, Gree, and Naver, the idea was to encourage Android adoption in China and other developing markets by building out its app ecosystem.
“Four or five years ago, Android had a smaller market share than iOS and Windows mobile was coming out and everybody was skeptical about Android and today it’s a no-brainer,” says DCM co-founder and general partner, David Chao.
The new fund not only includes the same list of limited partners, but also adds new names like Baidu, Softbank Group, and Qualcomm.
With the new fund, DCM will look to expand not only the geographic scope of its investments (the A-Fund has invested in markets like Brazil, and could back deals in Europe as well), but also the platforms in which it will invest. For instance, virtual reality companies are certainly on the menu for the new fund, according to Chao.
“That’s more along the lines of maintaining flexibility,” Chao says of any VR investments the A-Fund might make.
Beyond its platform flexibility — looking at investment opportunities in virtual reality or on smartwatches and wearables — the value of its geographic diversity and its big Asian co-investors should help the fund as it makes new investments.
“Over the last four years the mindshare and awareness of U.S. entrepreneurs around China and Japan and Korea and the players coming out of those regions have increased dramatically,” says DCM general partner Jason Krikorian.
The participation of strategic investors in the initial A-Fund was what attracted Playstudios founder Andrew Pascal to the fund.
“We’ve been focused primarily on the English speaking market, but we knew we wanted to focus on Asia. The participation of the big Asian companies in their fund, was how and why when we first met them we were excited,” Pascal says.
And although Pascal was developing applications for both iOS and Android platforms (and while on average Apple users are bigger spenders) he says his company wouldn’t be where it is without the contribution of Android customers to the company’s revenues.
“There is a massive audience of Android users, and by definition therefore it is a massive marketplace, so there’s nothing but opportunity,” says Pascal.