Tandem Raises $32 Million for Second Mobile-Only Fund

By Nathaniel Mott
On June 14, 2012

Tandem, a Silicon Valley-based accelerator that works with small groups of early-stage startups building products for mobile devices, has raised $32 million for its second fund, including an undisclosed amount from Chinese gaming company The9. The firm is accepting startup applications until July 1.

The accelerator offers six months of mentorship and invests $200,000 in each of the startups it accepts, a combination that Renert refers to as “muscle capital.” Tandem’s $200,000 investment is larger than TechStars and Y Combinator’s average investment of $18,000. By raising $32 million for its second fund, Tandem plans to invest more money as startups progress to stick with its companies and participate beyond its 6-month starting period.

The9’s investment in the fund will give the accelerator access to Chinese startups and a bit of street cred in the mobile gaming community. Besides a number of MMORPGs (think “World of Warcraft” if you aren’t familiar with the term) The9 operates a mobile platform with access to 900 million mobile users and more than 30 Chinese app stores. As the Chinese mobile market rapidly expands, gaining access to startups in the country – and giving US startups access to The9′s massive gaming platform – can produce a huge return on investment for Tandem. The two companies may also co-invest in Tandem-backed startups’ later funding stages, offering a one-two punch in China and Silicon Valley, two of the world’s largest tech ecosystems

Despite increased funding and access to a greater number of startups, Tandem has chosen to work with small batches of startups – 3 per quarter, typically – to avoid diluting its impact . “From what we’ve seen, the more companies you do at once the less attention you can provide to any one of them,” co-founder Doug Renert says. “So we try to find that balance where we can truly become part of an extended team during that critical early stage of the business.”

Tandem seems to be pushing all the right buttons in the success machine. A strong background of working with mobile companies to the exclusivity of any other category of startup and a new partnership with a Chinese heavyweight mean that Tandem is targeting the right markets to find and nurture startups with high growth potential. Instead of churning out as many startups as possible, Tandem’s work with small batches of companies and its investment of “muscle capital” shows the accelerator’s commitment to avoiding the “startup factory” trap that some accelerators can fall into.

Renert says that 9 of the 10 startups that Tandem has worked with have either been favorably acquired or have raised further funding; the other was acquired but wasn’t a favorable return on investment for the accelerator. One company, ZumoCast, was acquired by Motorola in 2010; another, PlayHaven, operates a real-time monetization platform for mobile games and supports 500 million game sessions from 1,500 games each month.

Investors in Tandem’s second fund include: Verifone CEO Doug Bergeron; Dan Cooperman, former Apple General Counsel; Google founding board member Ram Shriram; Playdom founder Rick Thompson; Amazon’s SVP of consumer business Jeff Wilke; and Dan Warmenhoven, Board of Directors chairman at NetApp.