Mobile startup in Fremont smartens up mass market cell phones

Thursday, December 24, 2009, 12:02am PST
Silicon Valley / San Jose Business Journal - by John Sailors

HipLogic Inc. is working to bring hip smartphone apps to mass market cell phones.

The Fremont company this month raised $7 million in a second round of funding to help bring its “phonetop” software to market. The company also announced its first partnership, with the European mobile retailer Carphone Warehouse Group PLC, which has created a giant retail venture with Best Buy Co. Inc.

HipLogic’s software gives users instant access to their favorite content, from social networking sites including Twitter and Facebook, to news, weather and traffic reports.

“What people see on TV as the iPhone experience, we want to take that across to many, many devices,” said HipLogic President and CEO Mark Anderson.

The second round of funding announced on Dec. 2 came from Benchmark Capital, Palo Alto-based Bay Partners, Waltham, Mass.-based Stage 1 Ventures, and Accure Sports and Entertainment Ventures, which also is based in Waltham. The company’s initial round of funding in February 2008 raised $4.5 million from Menlo Park-based Benchmark Capital.

Anderson said that even devices people call feature phones are pretty smart these days.

“The problem is that because a lot of them are in pretty closed environments, developers don’t develop on them at all,” he said. “So the result is there isn’t a great content experience on those devices.”

HipLogic aims to change that.

Based on pull technology

The company’s software uses “pull” technology, which constantly pulls data from sources on the Internet so that it is instantly available, without users having first to launch an application and then wait for downloads.

The software also offers more customization than even some smartphones, an added attraction for users.

And, very important to carriers, the data is compact.

“It’s very network-efficient,” Anderson said. “We do a lot of computing in the cloud, so we can send a very optimized, small-kilobyte package down to the phone, so that it isn’t bandwidth-intensive.”

He noted how AT&T Inc. has been battling bandwidth problems on its mobile network. An AT&T official on Dec. 9 admitted at an investors’ conference that “3 percent of smartphone customers are driving about 40 percent of the traffic” on its network and that the company is considering incentives to get users to lower data use.

For revenue, HipLogic is eyeing several possible streams. One is licensing agreements with equipment manufacturers and operators. HipLogic also has set up its own app store.

The trick, though, may be in getting onto cell phones, said David Gill, senior director for mobile media at the research firm Nielsen Co. This is a general rule for most mobile applications.

“I think the single most important driver of their success will be the ability to get it out into the channel and get distribution deals,” Gill said. “Getting it in front of the consumer is the biggest part of the battle.”

HipLogic is off to a good start at the task in partnering with The Carphone Warehouse. The London company has grown into a leading mobile retailer in Europe, with some 2,400 stores in nine European countries. It had $2.7 billion in revenue for its most recent fiscal year ending March 2009.

In June 2008, Minneapolis-based Best Buy bought a 50 percent stake in The Carphone Warehouse’s U.S. and European retail operations in a $2.1 billion cash deal. The two have established a joint venture called Best Buy Europe.

The Carphone Warehouse is exploring the use of HipLogic’s phonetop on a few platforms and is looking at others.

HipLogic may also find bright prospects in the United States. Smartphones represent only 22 percent of the market in the country, Gill said, and users of regular cell phones — inundated with iPhone and other smartphone commercials — have a growing interest in more features.

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