With Backing From Asia, New $100 Million A-Fund Targets the Android Ecosystem

Venture capital firm DCM is teaming up with several Asian mobile companies to launch a new $100 million investment fund aimed at companies that focus on creating products and services for Android.

Backers include Chinese Internet firm Tencent, Japanese social network GREE, and KDDI, Japan’s second largest mobile operator. The A-Fund, as the effort is known, will be managed by DCM and is already working on closing its first couple of investments.

In an interview on Thursday, DCM general partner David Chao said that the opportunity Android presents is unprecedented.

“This is the equivalent of when Microsoft came up with Windows to combat the pioneering stuff that the Macintosh came up with,” Chao told Mobilized. “We are just seeing the tip of the iceberg in terms of Android becoming a dominant operating system in terms of mobile and connected systems.”

Of course, DCM is far from the only venture firm focused on Android, nor is the new fund the only one focused on Google’s operating system. Accel’s Rich Wong, for example, has been a huge proponent of Android and backer of firms that are focused on that platform.

Still, Chao said there are still product areas and regions where Android-based efforts are underfunded. In particular, he mentioned that companies in Japan and China as well as those focused on digital media and tablet applications are among the spots in need of further investment. The A-Fund, he said, is open to companies of all sizes and in all regions. It’s also open to companies doing services and hardware and not just those making applications.

“We absolutely do not want the world to think this is just an app fund,” Chao said.

Although the focus of the fund is on spurring the Android-based economy, Chao said the fund doesn’t mandate that those it invests in focus solely on Google’s operating system. However, the ideal companies, he said, are “Android-heavy” ones whose ideas haven’t been possible in more restrictive ecosystems, such as the one surrounding Apple’s iPhone.

“We are looking for companies that truly take advantage of the openness of Android and companies that are obviously relatively potentially frustrated with the other platforms,” Chao said.

Although it has now been a couple of years since the launch of the G1, the first Android phone, the operating system has posted significant gains in recent months and is expanding its reach later this year, in particular as devices as low as $50 or $75 arrive in developing markets. Android-based devices are expected to make up 40 percent of the smartphone market this year, according to IDC.

In about a month, the company expects to announce additional investment partners outside of Asia, as well as the first companies in which the fund is investing.

“We are closing three or four deals as we speak,” Chao said.

(Android pop image courtesy of Flickr user asirap)