Summary:

What are venture capital firms looking for in mobile startups? Think emotional value and rethink the economics of content, Albert Wenger, a…

Albert Wenger

What are venture capital firms looking for in mobile startups? Think emotional value and rethink the economics of content, Albert Wenger, a partner in Union Square Ventures, told Ernie Sander, executive editor of paidContent.

Mobile Phone as Personal Identity: “The only thing more stable than most people’s phone number is their social security number,” said Wenger, identifying mobile phones as “the first true single-user device.” Laptops were designed around the idea that multiple people might be using them, but “your phone knows it’s you.” While USV’s thinking on this issue is early, Wenger is looking ahead to a time when somebody figures out “how to create identity in a distributed fashion around someone’s mobile experience.”

Why Union Square Ventures hasn’t invested in content companies “Is there nothing that can be done for them?” Sander asked. Wenger said USV has found, in most cases, that the economics of the content business aren’t conducive to venture investments and “won’t make for venture-type returns” (one exception he listed is the Huffington Post). That’s because he sees a nearly infinite supply of content — and a fixed demand, with total attention “only growing by the number of people coming online….You have to build a business around scarcity, and the scarcity is attention.”

As for aggregation startups like Zite and Flipboard, Wenger said USV has met with most of them — and still doesn’t think most of them have “real value and real engagement from end users, where it’s not just another reading venue. . . . Whoever cracks the nut on that will have something very interesting, and making mobile part of that experience will be critical.”

Voluntary Contribution Models: The New York Times’ paywall model, Wenger said, could have been enacted in a more interesting way, by letting readers who get the most “emotional value” from Times content pay more for it. It’s still early, but sites like Kickstarter (which USV has invested in) have demonstrated that business models that “let people self-identify how much value they are deriving from a project” can work. And these contribution models “appeal to more fundamentally positive emotions than guilt.”

Bringing Silicon Valley to Silicon Alley: NYC has now reached a critical mass startups, said Wenger, though attracting product managers and interaction designers is still a challenge — but the initial hurdle is simply “getting kids excited about working for startups, as opposed to Google (NSDQ: GOOG) or Facebook or Wall Street.” USV backs Hack NY, which brings computer science interns to New York, and Wenger credited Google for making “a conscious choice to put engineering in New York.”

Comments have been disabled for this post