VC Rewind: Well-funded Obopay placing bets in multiple regions

They say the first million is always the hardest. But for Obopay CEO Carol Realini, it was more like the first $8 million in Series A financing.

“That was the hardest round because we had to explain mobile banking to people,” says Realini in regards to the Series A round, which closed in 2006 and raised funding from Redpoint Ventures and ONSET Ventures. But Realini says that the round only closed after she encountered rejection from most of the VCs she pitched the upstart mobile payment service to.

Raising the next $130 million in funding was comparatively easy.

As investor perceptions shifted, and the mobile payment space went from obscure niche to hot growth sector, Obopay’s next several rounds required little fund-raising effort, Realini says. The company secured a $70 million round in March, 2009 led by Nokia. In 2007 and 2008, Obopay raised money from backers, including AllianceBernstein, Qualcomm Ventures, Societe Generale and Elephant Capital.

The company is using the money, Realini says, to expand in the United State, to introduce services in several African countries, and starting this year, to fund an extensive rollout effort in India.

It’s not just Obopay that’s generating interest from deep-pocketed investors in the mobile payment space. Others include:

C$ cMoney, a Houston, Texas-based mobile payment system developer, raised $100 million this month from AGS Capital Group to launch a platform for the financial services industry.

Zong, a Palo Alto, Calif.-based mobile payment service used by the online gaming sites and social networks, raised $15 million in April from Matrix Partners.

RegaloCard, a Doral, Fla.-based operator of a service for delivering gift cards to Latin American consumers via mobile phones, raised a $7 million round of financing in January from Dublin Ventures and Kinsail Corp.

• And M-Via, a Sunnyvale, Calif.-based provider of a mobile payments service currently focused on money transfers between the United States and Mexico, raised $5 million in private funding, according to a regulatory filing in March.

Meanwhile, forecasters predict the number of mobile payment users worldwide is poised to increase sharply. Research firm Gartner says the number of mobile payment users will exceed 108.6 million in 2010, representing 2.1% of all mobile users and a 54.5% percent increase from 2009, when there were 70.2 million users.

Growth is strongest in Asia, Eastern Europe, the Middle East and Africa for mobile payments, according to Gartner, while adoption in North America and Western Europe lags behind due to the plentiful choices of payment methods that consumers already have.

Obopay is placing big bets in multiple regions. The company recently partnered in Kenya with telecommunications service provider Essar Telecom Kenya Ltd. to launch a mobile money transfer service there. It’s also working with Societe Generale in French-speaking West Africa. In June, the companies announced the rollout of a service in Senegal for mobile money transfer and bill payment.

The company’s biggest effort by far in the developing world, however, is in India. There, in partnership with Nokia, the company has begun rolling out mobile banking services in a few areas, with plans, Realini says, to eventually establish a national presence.

Certainly there’s room for growth. Realini says an estimated 600 million Indian adults currently do not have access to banking services. Another cause for optimism: India is in the early stages of rolling out a national identification system that Realini says will help with streamlining what is today an often costly and cumbersome process of verifying customers identities.

Today, she says, it’s pretty common for new customers to show up with drivers licenses and other IDs that have water damage from monsoon season. —Joanna Glasner