I don’t usually root for VC-backed companies to succeed or fail. It’s not my job and it’s not my money. The only exception comes when I publicly express faith in a company’s prospects, only to get accused of ill-informed pandering by those with more insight into the company’s technology and competitive position.
One recent (and rare) example concerns Amp’d Mobile, a Los Angeles-based mobile virtual network operator (MVNO) aimed at the MTV market. I basically got convinced of the company’s promise by CEO Peter Adderton (who previously launched Boost Mobile), and by the validation of around $250 million in VC funding from both financial and strategic investors. Mobile bloggers, however, were none to convinced – insisting that the MVNO model was inherently flawed, and that Amp’d would run into some serious troubles.
So I crossed my fingers, hoped for the best and kept tabs. At the very worst, Amp’d would fail and I’d use it in as self-serving attempt to convey my own humility.
But it seems that the finger calisthenics might be working. Amp’d just raised another $107.5 million in VC funding (Series E), with hedge fund Old Lane Management joining return backers like Columbia Capital, Highland Capital Partners, Redpoint Ventures, Intel Capital, MTV Networks, Tudor Investments and Universal Music Group. Moreover, Amp’d is currently pondering whether or not to accept additional cash. My bet is that it will end up taking some, given that each of its prior funding rounds was staged-out.
Now I recognize that VC funding does not necessarily lead to corporate success (see: bubble-era CLECs), even though the correlation is a bit stronger for subscriber-based services companies like Amp’d. But I think there is something to be said for the fact that original Amp’d backers – Columbia, Highland and Redpoint – continue to exhibit active faith in a company that has now raised more money than have some of their past funds. Not blind faith, mind you, but faith prompted by Amp’d's ability to secure nearly 200,000 subscribers. Rumors that it still hasn’t even hit the 100k mark are simply wrong. Moreover, Amp’d also has begun to produce significant secondary revenue through content creation and distribution.
From a more macro level, much of the company’s skeptical press has been more a reflection of its market than of itself. Specifically, a number of respected mobile-tech bloggers disavow the MVNO model as unsustainable. For the uninitiated, MVNOs buy or lease unused mobile carrier spectrum at wholesale prices, and then sell the “minutes of use” to retail consumers with a device that can access specified content. Perhaps the best-known example of an MVNO – although it’s not typically thought of as one – is OnStar, the automotive communications companion that uses extra Verizon capacity. MVNOs also include content companies that provide exclusive audio and video via specialized handsets that double as regular cell phones (which is what Amp’d in doing).
One complaint is that the reseller model makes the margins relatively thin, but the more salient one is that the glut of MVNOs makes it more difficult for each one to distinguish itself – a feat necessary when convincing someone to sign up for an 18-month service contract. And it’s a legit argument, but difficulty does not necessarily presage failure.
Amp’d is not trying to be everything to everyone. Instead, it seems to have successfully aimed its pitch at a large and tech-savvy target market, in large part by taking strategic investments from that market’s most trusted content sources (MTV, Universal). Ditto for a stealthy Cincinnati-based MVNO startup called Genie (backed by Spark Capital), which is teaming with a major supermarket chain to target the Middle America market. Its target demo might make it the anti-Amp’d, but the laser focus is similar.
Again, no promises of success. But today I feel a bit more comfortable with my prior cheerleading…