We’d reported mobile advertising company mGinger receiving its first round of funding a month or so ago from NEA-IndoUS Ventures. mGinger’s model of paying users for receiving advertisements is much debated, and many including me have been skeptical of their success. The funding – of $2 million – was led by Draper Fisher Jurvetson (DFJ), and I spoke to Sateesh Andra, Venture Partner with DFJ recently:
How much have you invested in mGinger?
We’ve invested $1.5 million, while NEA-IndoUS has invested $500,000.
Why mGinger, what was the company’s valuation, and how did you value the company?
There are three things – first is a good marketing opportunity. Mobile is a great medium, as is opt-in permission based advertising in that segment. The second factor is that the mGinger team is a great team. The third factor is the traction – there are close to 1 million subscribers. Also, the change in market dynamics: when I turn on a spam filter, I don’t receive advertsing. That’s what the Do Not Call registry is doing. As a marketer, I can sign up with a network like mGinger, and I get advertisements that interest me. mGinger is building a directory of consumers. I can’t comment on the valuation.
There other advertising models like 160by2 for free messaging and even (Rajesh Jain’s) MyToday that is a publishing based model…Why the push advertising model like mGinger’s?
All of these things can be done. mGinger is not a one product company. When advertisers look for a platform, they consider: (a) Content Compositition, (b) Cost of Campaign and (c) Measurability. We think mGinger provides this value, and importantly, it has traction.
But don’t the other models give advertisers the same opportunity? And what other products has mGinger planned?
I’m not saying that mGinger is better. We’re betting on a team, the opportunity and traction. We’re not just looking at the next couple of years. I can’t talk to you about their plans.
More in the extended text
What kind of a year-on-year growth do you expect from the company?
Usually they have operational plans, and they give you a figure for one year. No one comes with a 3 year plan, and the growth depends on the sector and the ecosystem. In the chip business, it take 18 months to launch the first product, and 18-36 months to start selling and establishing partner sales. I think $10-15 million in 2-3 years – that’s building good value.
Where’s the exit for you in mGinger?
You can’t build a company with an exit in mind. Once you’ve created value, then you can look at M&A, IPO…you decide the exit once you’ve built value. There have been a few IPOs and some acquisitions in the mobile space, and what’s happened is a sign of things to come. However, no one thinks of an early stage investment with a clear exit in mind.
With just $2 million in funding, why did you take the co-investment route? Why not put in all the money yourself?
Early stage deals are a lot of work, and if there are two partners, then we both go to work together for the company.
What’s your take on the ecosystem on the Internet and mobile? The pace of growth doesn’t appear to be half as fast as expected…
I don’t think it’s going to be like South Korea or the US. It’s going to be about leveraging new media and bringing in efficiencies. In reality it’s always more expensive to build a company, and it takes longer to get revenues than planned. In India, people talk about e-commerce, credit card penetration, broadband.
Which other sectors interest you?
We’re interested in essentially consumer services – nano technology, clean tech, IT enabled retail entertainment. Reva, Komli, MChek (mobile payments) and Live Media are among our investments. Also SeventyMM, which a combination of NetFlix and FedEx. The entry of Reliance in the online home video segment validates the opportunity.