Giant CEO of Nimbuzz Raises $15 Million; Has Coffee with PEHub

I just had a frothy cappuccino with Evert Jaap Lugt, also known as “EJ,” in San Francisco’s South Park. Lugt is the Dutch CEO of Rotterdam-based Nimbuzz, one of hundreds of startups offering free mobile VoIP services, along with IM, group chat, and loads of other services that work across different communities and companies like Skype, Yahoo!, Facebook and MySpace.

All that competition can’t be fun, but Lugt seems to appreciate what he’s up against — even thrive on it. Experience undoubtedly helps. Lugt is a serial entrepreneur who founded, among other companies, @media, which developed Palm Pilot applications for the pharmaceuticals market. (Salespeople gave the handhelds to doctors, then deluged them with drug information.) In 2000, it sold for $30 million to NOB in the Netherlands, a government-owned multimedia company.

A fresh $15 million in second round funding for Nimbuzz — which raised $10 million prior — surely helps, too. I asked Lugt about the infusion among other things as I sat in his towering shadow at Caffe Centro. (And at 6’5″ tall, he really does tower. “It’s the Dutch cows,” he told me, insisting that their milk is higher in protein than that of our inferior American cows.)

You’re competing against hundreds of startups at this point. How do you keep motivated to stay in the game?

Mobile is so unlike the Internet, where you have Google and Amazon. It’s much more country by country, and that regional focus makes it an entirely different ballgame. We’re just at the beginning of this.

[Competitor] Jangl went out of business. Weak company or sign of what’s to come?

I think Jangl will be one of many that will be out of business soon. It didn’t get traction fast enough. Also, it didn’t have shareholders willing to go the whole way. I do. Our backers know it’s not going to be a quick path to success like Skype.

Speaking of your backers, Mangrove Capital Partners famously backed Skype, but I don’t know anything about your other backer, Naspers/MIH.

It’s a South African media group that controls about 90 percent of South Africa’s media, from print to pay-TV channels. It’s also been investing its print revenue in the Internet and emerging markets for about 15 years. It backed MailRU, which is sort of a Russian Hotmail, and China’s QQ [the most popular free IM program in China; it went public on the Hong Kong Stock Exchange in 2004].

How did you cross paths?

[Naspers] found me, and at a good time. I was out here in the Valley a year ago and I met with nine venture firms and I thought, this is just money. We’re in for a big, long fight; I need distribution power.

Had you talked with any other media companies, anyone in the U.S.?

News Corp. also approached me and wanted to make an investment, but by that time, I was already in the due diligence process with Naspers.

So how is it going: how many active users do you have at this point?

We have more than 1 million registered users, about 500,000 active users and I’d say that 25 percent of them are really active. That’s about the same percentage of active users that Skype reports, by the way.

And revenue?

We’re not making revenue yet. We’re focused on getting the best product out and building our community, then we’ll focus on ads.

You, too? How? Where? What will users see?

Well, you might see a message after you log-in and you’re waiting for the application to open. Or during a chat session, you might see a little banner ad at the top of the page. Or you’ll go to a Web page where you’ll say, “when Puma is having a 50 percent off sale somewhere, I want to be notified.”

Sounds good, but I’ve read complaints about your user interface. Are you getting feedback to that effect?

No, actually, our mobile UI is a unique selling point of our application. Our PC client is pretty clunky, though, it’s true, and we’re working on that.

With this latest round of funding, you’ve signed agreements with 10 new social networks and three operators. Can you name any of them for us?

I can’t yet, but two of them are very large social networks in Germany, comprising about 108 million people worldwide. And two of the operators are European and another is in Southeast Asia. We’ll start making some revenue when we go live on Sept. 1 with one of those German social networks; we have a revenue sharing agreement.

And nothing in the U.S. Why not?

America isn’t where I want to compete right now. For one thing, there are just many more higher-end devices in Europe, many more smart phones.

So why are you here right now?

Can I speak on background?

Sure, I’ll just eat this banana bread while you talk.

[Background.]

That was truly delicious. So where are most of your customers?

A lot of them are in India, Indonesia, and the Eastern Bloc.

And how fast is the company growing. You had 10 employees two years ago. How many do you have now?

We have 40 people in Rotterdam, handling marketing and business development. We also have 30 employees in Cordoba, Argentina doing software development.

Is technical talent hard to come by in the Netherlands?

Well, the talent is there, but most of it wants to work for big corporations. They say, startup? Whoa, that’s too risky. Culturally, it’s completely opposite from the states, which is what I love about it here [in the U.S.].

What about consolidation in the space? Are you seeing any acquisitions?

We were approached by a publicly traded European company that I can’t name. But no, it’s too early for that. I think we’re going to see a lot of consolidation in another two to three years. It’s just ridiculous that Skype, Amazon, and operators aren’t conquering the mobile market themselves.