Mobile Marketer : HipCricket gets additional $2M funding & Google Phone

A key factor helping to drive mobile marketing is the medium’s high rate of click-throughs and conversions. As an example, Dunkin’ Donuts campaign that used mobile coupons to help promote a new latte drink, generated a 4% response rate which translated into a 21% increase in store traffic. As a comparison, the response rate for an ad is less than 3 percent for direct mail and less than 1 percent for Internet banner advertisements.

In some European countries, the response rate is as high as 50% (yes, 50%, I didn’t put an extra zero) and in US, some campaigns have seen response rate of 7%+

About 95 percent of all active cell phones in the US (220M users), can be reached by using text messages, and 62 percent of all mobile phone subscribers regularly send and receive text messages. High response rates also translate into high CPMs-$41 for mobile display ads in 2006. By 2011, CPMs are still expected to remain fairly steep at an estimated $23.

HipCricket is one of the biggest players in this market.

HipCricket is the nation’s largest mobile marketing operation focused on the broadcast community, serving more than 100 clients across North America. Over the past 12 months, the company’s product and approach drove 250 percent growth in its client base, including companies such as Disney, Staples and General Motors and broadcasters like Los Angeles’ KNBC.

HipCricket technology is an effective way for advertisers to utilize text messaging in a user-friendly, web-based format.

HipCricket’s round A closed in January for an undisclosed amount, but HipCricket said that “strong investor demandâ€�? brought in a further $2 million from angel investors, Broadmark Capital, and a European investment group.

This opportunity has not gone unnoticed by Google. The rumors of Google phones (code name switch) have been around for almost a year now, and there was some confirmation of the project by a European executive.

What Google wants to do is to give away the phone cheap in return for advertisement views. Let’s not forget Google’s purchase of Dodgeball.com - a mobile location based social networking service, that is now available in most US cities.


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Angel Investors: A different breed of animal

I often get asked by entrepreneurs what it is like pitching a business idea to a group of Angel investors . I also hear of frustration in general, about not quite knowing what is expected in a VC or Angel pitch. Earlier, I wrote about the art of delivering the perfect fast pitch.

So are Angels similar to VCs? The short answer: Yes; The long answer: Not quite!

Sure Angels and regular VCs are looking for the same things: A good team, decent ROI in a reasonable time frame, etc. etc. But that is where the comparison ends.

Angels are a breed apart. I have gone through the whole gamut of raising funds for my company, started 3 companies (ok, we won’t talk about the road kill of 5 or so that never saw the light of day), invested in and mentored several companies in an incubator, and now am fortunate enough to be part of the Tech Coast Angels - the largest network of Angel investors in the world. Sitting in many startup presentations has given me some perspective on the pitch process - much of which is very different from what I believed when I was the person under the hot lights.

1. Angels play in a different sandbox: When I was in startup mode, I always thought that Angels, since they invested their own money, would be very risk averse. Not true. Most Angles have a some money stashed away for groceries and gas, and after that have managed to carve out a little play money that their spouses have agreed to look the other way, on. Within that sandbox, the investor is going to do whatever the heck they please. They are not answerable to anyone. If they lose money on a deal, they shrug and move on. It is worth remembering that VCs do invest other people’s money, so they have to be more conservative.

So if you have an oddball idea that everyone has told you will never get funded, try talking to an angel. You never know….

2. Angels are Vegas players, with one extra gene: Most Angels probably know in their bones that if they were just out to invest money, there are a whole lot of higher return, lower risk investments that they could be in. I would probably put all my money in overseas real estate right now. But Angels are not just investors, they have an extra nurturing gene. Most of them delight in helping and coaching a start-up, and seeing it succeed.

For that reason alone, Angel money is one of the best deals for a start-up company. Many VCs will not even invest unless they know that there is some Angel money that has gone into a deal. When you think about it, how often do you find a smart and experienced consultant (the angel, of course!), who is actually going to pay you for all the value that they bring in?

3. Are Angels are just a bunch of rich people who just got lucky? Not!. I was once asked this question, and after some time of hanging around with Angels, I can only say that they did not just get lucky. Many of them started companies themselves, and after a lot of work, managed to have one or more good exits. Many are professionals who have spent many years in the business arena, doing what they do best, and who have decided, for various reasons, to be involved with startups. I suspect many not only enjoy the investment aspect, but also look forward to the camaraderie of other angels - and they think that that is a lot more fun than being hunched over etrade all day!

4. There is strength in numbers: With Angels, you are typically pitching to a large group (on average from 10 to 100 people). No matter how specialized your niche, you are very likely to find one or more Angels who understand your domain really well. And Angels do make up their own minds regarding all their investments. So by and large, companies will find at least a handful of Angels (mostly more) who are at least interested enough to spend some time looking at the deal further, if not investing in it right away.

5. Angels make great girl/ boy scout leaders: There are instances in which a deal did not get the exact amount of investment that the company was looking for. Sometimes the deal is oversubscribed (a good thing!). In those cases, Angels tend to share the round so as to let in all those who are interested, and reduce the amount invested per angel. Sometimes, the round is not enough. In those cases, Angels are remarkably good at marshalling the troops within, or finding outsiders who happen to be sitting on a pile of cash, to co-invest. If the round is a large one, oftentimes, Angels will bring along VCs they know, into the deal.

 


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Starting, growing and managing a starup

Panel: Starting, Growing, & Managing A Business: Opportunity & Pitfalls

Speakers:
Sumita Batra, CEO of Ziba Beauty, and author
Himanshu Bhatia, CEO of Rose International, a IT services company
Jody Dunitz, member of Tech Coast Angels
Sharon Stevenson, partner at Okapi Ventures
Moderated by Toni DasGupta, 4D Convergence

TiE logoOn February 21st, 2007, the TiE Southern California chapter showcased an all women’s panel, which discussed the challenges and joys of starting and growing a business. The discussion was aimed at being a practical, how to, down in the trenches perspective from two entrepreneurs who have been there and done that, and two investors who have helped entrepreneurs get where they are going.

1. Starting/ Growing your business: Often, one hears of people starting companies, effortlessly raising funds, growing the company spectacularly for a few years, and then taking the company public. Reality seldom seems to mimic such perfection.
What prompted you to start your first (or present) company?
What did you need to do to get your company off the ground, and to grow it?

What is the biggest challenge you can remember facing in the early days?

Sumita spoke of taking on the responsibility of running the company (Ziba) that was started by her mother. Although the business was in existence, she spent several years growing the franchise, and very importantly, giving the brand a lot of cache (she and Ziba have been associated with many of the beautiful people - Madonna, Naomi Campbell and a host of other Hollywood regulars).

Himansu spoke of starting her IT services company Rose International, initially, as a lifestyle choice, over working at a corporate job. Over the years Rose has grown to 1000 employees, and is a long way away from a “lifestyle” type of business.

Sharon credited her entre into the VC business to a case of good timing. She came into Okapi ventures at an opportune time, when she was able to apply her extensive training in the bio-med field into directing Okapi’s life sciences investments.

2. Self fund or venture fund: Did you choose to boot strap/ self fund your start-up or did you decide to look for outside investors? Are there advantages to getting outside investment vis-à-vis funding your own venture?

Rose International was bootstrapped from the beginning and had never pursued venture funding. Ziba has had a line of credit with the bank for use in financing its expansion. Jody spoke about start-ups, particularly technology companies, needing large amounts of capital, initially, and that although some companies might do well without any outside infusion of cash, for many, being well funded at the start is not only necessary, but is a critical determinant in its future success. Both investors also mentioned that the value is not just in the cash, but in the know-how and expertise that the angel or venture investor brings to the table. In other words, smart money is good money.

3. Women in business: Today about 50% of all businesses are started by women, yet there are very few women heading up large companies. Only 4% or all women led companies make it past the 1M in revenue mark. Why don’t we see more women leading companies (both entrepreneurs and in corporations)? Is it a choice or from lack of opportunity?

Neither entrepreneur felt that there was a lack of opportunity for women. It was also clear that the women on the panel were all self starters and that gender would not be factor for them. They all acknowledged, however, that they had always been in professions where they were seriously outnumbered by men. Having the strong support of their families was cited as one of the reasons why these women felt they succeeded through many hard times.

4. Mentorship: How important is it to find a mentor. Did you find a mentor over your business career?

While having a mentor was considered to be very important, it is clear that it is not very easy to find a good mentor, who has no other agenda than helping their mentee succeed. A key factor in finding the right people to help and support you seems the be the willingness on the part of the entrepreneur to get out there and talk to people about the business, and about any issues they might be facing.

There was some discussion about the fact that for specific problems, it might be a good idea to pay a professional (such as a consultant) for advice. Sumita talked about having a mentor who had helped her over the years by providing guidance, when she hit various business road blocks. She was able to make best use of his expertise by calling upon him when she had a specific problem, and then putting his advice into action. She found that such targeted interaction, followed up with specific action on her part to resolve the problem, helped her to use her mentor’s time most efficiently.

5. People power: We hear that investors invest in people, not ideas. How important is it to attract the best talent? How do you go about recruiting and retaining the best? How important is the management team in companies that you invest in?

All the panelists agreed that the people factor was the biggest determinant in the success of a company. It has been said that it is better to invest in an okay idea with a great team behind it, than an grand idea with mediocre management. Sharon and Jody agreed that it is the management team, ultimately, that will make or break a company. Sumita explained that Ziba maintains its edge by hiring the best, and they are able to do this by maintaining a close knit family atmosphere in the company. Himanshu spoke about that fact that when a company grows to 1000 employees, there needs to be a structure where the top management is intimately connected to the next level of executives, who are closely involved with all the employees that they are responsible for. Besides that, a generous, and well administered incentive program is a good vehicle for retaining top talent.

While there is no single formula for success, it is clear that the one common factor that successful people share is the passion that they feel for their endeavors, and the extraordinary effort that they are willing to make in order to realize their dream.


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The Fundas of The Funded and The Funders !

A new site called the TheFunded.com has just launched that rates venture capitalists, giving entrepreneurs different type of information about the VC firms.

Considering the venture funding process is still secretive, and there is limited public and/or objective information about venture capital firms (and their individual partners) the information might be helpful.

There is some quantitative information available on a few of the funds (SDC Platinum and other databases) but a central place for qualitative information about the people and process behind the VC groups is still lacking. You hear a tidbit here and there and here, or can see a visual map by linksview blog but a meeting place that has exceeded the critical mass would be welcome.

My concern here is that the “reputation” of the firm has very often have no relationship with the “reality” of the firm. I can name several VC firms where my perception of a particular firm, which I had gleaned from talking to others in the field, was proven to be completely off base when I actually interacted with them in real time.

This reputation process has been tried in the dating context without much success. As ouriel ohayon quipped:

Although at the end of the day, like in dating sites, you don’t know what you get until you are married and signed the papers. And even then…

So true!

Michael Arrington noted in his Techcruch blog, that since most startups are turned down for funding, there will be a tendency for people to leave negative comments. I actually think that since the postings are not anonymous, most of the comments will be extra positive.

Also a note of caution: TheFunded was started by an entrepreneur who says he was really “burned�? by a VC firm. So make sure to bring some salt and some A1 sauce when you are reading the site.

Although I haven’t used it, the InsiderVC.com has similar service and it will be interesting to see how theFunded.com evolves.


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