Patrice Peyret
Venture Partner,
Nexit Ventures
Mobileway Co-founder and ex-CEO
1999 The birth of an accidental industry
Often, technologies create brand new markets by being put to an entirely different use than what they were intended for in the first place. SMS was born as a service messaging backdoor for technicians working for wireless operators, but became an instant consumer success when it was released to the general public ten years ago. What was missing, however, was a single access point from which creators of SMS applications could reach out into all the wireless phone networks around the world without having to negotiate individually with each and every single operator. No operator could do it on its own because competing operators would often not grant access to potentially competing networks. Perfect opportunity for a new company: Mobileway was born in November 1999 to serve this burgeoning market.
In the same period, two brothers based in Taiwan and the US saw a similar opportunity for different reasons: they could not exchange messages with each other because wireless operators could not easily interconnect across geographical and technological distances. And so was born “International Phone Matching” or Inphomatch. More on this later…
2000-2001 Going against several conventional wisdoms
Mobileway made an unusual decision for a start-up: go international immediately. Within a few months from inception, the company had offices in London, Paris, Singapore and San Francisco. The year was 2000; the Internet bubble was inflating, and major actors like Yahoo!, Lastminute.com and Nokia were growing aggressively and buying wireless data access from Mobileway. Being able to meet at the London offices of Yahoo! in the morning, have a follow-on meeting with their headquarters in Santa Clara in the afternoon, while organizing joint meetings with MTV-Asia the next day in Singapore, was paying off.
Meanwhile, Venture Capitalists in Silicon Valley had very little knowledge of the mobile space and even less so of SMS; the first round of funding in 2001 came from Nexit Ventures and Vertex of Singapore, an unusual move for a US start-up. In spite of all the buzz around WAP and “enterprise mobilization”, Mobileway remained focused on international SMS for consumer services like alerts and wallpapers downloads, receiving help from Nexit and Vertex for establishing operations in their respective geographies.
2002 A bubble bursts and a new business model appears
While the telecom industry lurched into a massive slump, the SMS market got an unexpected lift from a business model innovation: several operators introduced “premium” SMS rates for letting consumers receive new types of messages like ring-tones, and then share the extra revenues with the content providers. This created a new revenue opportunity for Mobileway’s customers while turning Mobileway into a combined telecom-and-financial network with increased value-add. Mayfield Fund and 3i Group in Silicon Valley, joined by Investcorp in New York, started investing in Mobileway, reassured by the ongoing financial support from Nexit and Vertex.
2003 Strategic partners, market catalysts… and some new competition
SMS having earned its business legitimacy, major players like Microsoft, Visa, Disney or Intel started buying services from Mobileway. Some of them even became investors: Visa, Intel and Citibank. At the same time, inter-operator SMS traffic in the US became a reality and Inphomatch, now headquartered near Washington DC, was able to capture the lion’s share of this new market.
2004-2005 The Mobile 365 years
Merging Inphomatch and Mobileway to create the largest independent operator of SMS services was a natural move. Mobile 365 was born out this merger in August 2004, and the volume of messages handled by its five data centers in Virginia, Illinois, France, Singapore and China quickly pushed Mobile 365 into the elite of the world’s largest 10 operators in terms of monthly data traffic.
2006 Further scale and scope as Sybase 365
While the IPO market was still very soft, it became clear that an acquisition by a larger industry player in need of a mobile data service play would be a good option to expand further. After a few months of negotiations, California-based Sybase made a definitive offer to acquire Mobile 365 in September 2006. The transaction closed on Nov 8 to form Sybase 365, a new division of Sybase presided by Marty Beard.
A few lessons learned from Nexit’s perspective
The scale and capital requirements for a business of this nature were probably somewhat outside Nexit Ventures “sweet spot” in terms of dollar size and resulting ownership percentage.
Nevertheless, the company exemplifies perfectly the combination of mobile focus and global reach as key success factors, in complete symbiosis with Nexit’s mission statement.
Another important take away is the need to adapt quickly while staying faithful to an initial strong goal.
These have been an amazingly fruitful seven years for me, and I look forward to applying the lessons learned to many more Nexit portfolio companies.
