Start-ups in the wireless middleware and applications space face huge challenges ahead and must stay focused on addressing real needs and revenue-producing applications, says a report by global venture capital firm, Crescendo Ventures.
The report, entitled The Wireless Wasteland – Forthcoming Carnage in Wireless Middleware, examines the hardships faced by the wave of start-ups in this sector, namely business models with unclear paths to profitability. Profitable commercialisation of applications and middleware platforms will only happen after the large-scale build out of infrastructure to support next generation wireless networks, says the report.
“We believe that some middleware solutions will eventually reach wider adoption once adequate end-to-end solutions are implemented,” says Thibaut Large, part of the Crescendo Ventures’ Research Group team.
“Successful companies will differentiate themselves by speeding the development of highly profitable IP services in spite of the spectrum and capacity constraints of 2.5G and 3G networks,” he added.
Many emerging companies have mistakenly approached wireless opportunities as a new market, rather than a new channel for the Internet. Although around one billion subscribers globally will use handheld, mobile wireless devices by 2003, most start-ups are said to lack the resources, infrastructure and technology needed to take advantage of the coming opportunities.
Factors characterising business models likely to fail include a lack of supporting infrastructure, limitations of current wireless handset technology, and security and privacy issues.
Promising market segments where start-ups can improve their chances of success are infrastructure enhancements, differentiated service allocation, real-time wireless billing and mediation, and location-based technology. Start-ups mentioned in the report as having correctly identified profitable segments include Cyneta Networks, Fujant and MorpICs Technology.