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Shares of cellphone game developer Glu Mobile Inc. rose 12% in their Nasdaq debut Thursday, March 22, making big winners of the company's venture capital backers.

The San Mateo, Calif., company priced 7.3 million shares at $11.50 each, raising a total of $84 million. Glu Mobile had expected to price its shares in a range of $10 to $12 each. At the offering price the company has a market capitalization of $327 million.

Goldman, Sachs & Co. was sole book-runner, with Lehman Brothers Inc. as co-lead manager, and Banc of America Securities LLC and Needham & Co. LLC as co-managers. Glu Mobile's common stock trades under the symbol GLUU.

The company was started in May 2001 as Cyent Studios Inc., and changed its name to Sorrent Inc. later that year. In May 2005, the company again changed its name to Glu Mobile Inc.

With Glu Mobile still operating in the red, investors treated the stock as a growth story, sending shares higher to more than $13 in the early afternoon.

Glu Mobile has incurred significant losses since its 2001 inception, posting a net loss of $8.3 million and $17.9 million in 2004 and 2005, respectively. In the first nine months of 2006, Glu Mobile reported a net loss of $10 million.

Glu Mobile develops and markets entertainment applications for mobile phones, offering games, ringtones, screens and information via 90 carriers worldwide. In its SEC filing, the company said it expects to continue to increase expenses as it implements its growth plans including: development and marketing of new games, international expansion, expansion of infrastructure, and content acquisition.

The initial public offering is yet another profitable exit for the company's largest shareholder New Enterprise Associates of Baltimore, which notched its fourth liquidity event this year. At the offering price NEA's stake in Glu Mobile was worth $55.4 million.

The six-year-old game developer had raised roughly $50 million in venture capital. Other major investors in the company include: Scale Venture Partners of Foster City, Calif.; Globespan Capital Partners of Palo Alto, Calif.; Sienna Ventures of Sausalito, Calif., and Granite Global Ventures of Menlo Park, Calif.

Scale, Globespan and Sienna Ventures hold shares valued at $27.6 million, $21.6 million and $18.0 million, respectively. Granite, who led a $20 million fourth round in May 2005, holds shares worth $10.9 million.

Glu Mobile's successful offering is likely to continue to whet the appetite of venture firms for wireless companies. According to statistics on VCDeal.com, venture capitalists have already poured $206 million in the sector this year, after investing $930 million in 2006.

The market for applications that run on cellphones are one of the fast-growing segments of the telecom industry.

A June 2006 report by market research firm Juniper Research estimates that the worldwide market for mobile games will grow from $3.1 billion in 2006 to $10.5 billion in 2009. Juniper says that the drivers for growth are being technology advances, proliferation of multimedia-enabled handsets, and increased availability of high-quality games.

Most telling about the VCs' belief in the industry's prospects are the amounts of money they have put on the line in individual deals.

In less than a year's time MVNO startup Amp'd Mobile Inc. has landed rounds of $107 million, $150 million, $60 million and $40 million. The two-year-old Los Angeles startup has raised more than $350 million overall. And last year mobile television provider MobiTV Inc. of Emeryville, Calif., raised $70 million in a July third round of funding.

When Glu Mobile was founded a slew of startups were raising millions, but the industry's players were reduced significantly by a period of rapid consolidation that began in 2004 when 11 companies were acquired.

That year Glu Mobile (then Sorrent) acquired Macrospace Ltd. for $3.6 million in cash, $1.1 million in promissory notes and 8.1 million shares of common stock, according to regulatory filings. Rival French game developer In-fusio bought Mobile Scope AG and Thumbworks Inc.; Mforma Group Inc. acquired Blue Beck Ltd., FingerTwitch Inc. and MobileGame Korea; and InfoSpace Inc. picked up Elkware GmbH, Atlas Mobile Inc., and Iomo Ltd.

Since then, consolidation (and resulting exits for venture firms) has continued. Jamdat Mobile Inc., which went public in September 2005 was acquired by video game publishing giant Electronic Arts Inc. of Redwood City, Calif., for $680 million only three months later.

And last year, Glu Mobile bought Manchester, U.K., wireless entertainment publisher iFone for $5.0 million in cash and 3.4 million shares of special junior preferred stock.

At the same time, Amdocs Management Ltd., of Chesterfield, Mo., paid $275 million in cash for venture-backed Qpass Inc., and m-Qube Inc. was bought by Mountain View, Calif.-based VeriSign Inc. for $250 million in cash.

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