Content is key in the mobile Internet market, but until now effective billing for content has been practically impossible for service providers. French telecommunications billing systems maker VoluBill hopes to meet that need by offering transaction information combined with traffic access information to help service providers implement innovative price plans. As a spin-out of Cegetel, France’s first private global operator, does VoluBill have what it takes to conquer the niche billing segment?
Grenoble-based mobile Internet billing solutions company, VoluBill has attracted a hefty first round of EURO11 million from multinational investors Sofinnova Ventures in the US, Paris-based Sofinnova Partners and Telesystem-Argo Global Capital of Montreal, Canada. Sofinnova Ventures and Sofinnova Partners committed EURO7 million, while Argo Global put in the remaining EURO4 million. Cegetel Group retains an 18 per cent equity stake in VoluBill.
VoluBill has launched a one-stop charging solution which enables service providers to bill content services in both pre-paid and post-paid circumstances and notifies the users of transaction costs prior to connection. The VoluBill product, the Dialog Control and Charging Platform, is based on advanced reliable hardware and software that can easily feed combined content and traffic information to the existing billing systems, minimising disruption and installation time.
Vesa Jormakka, general partner of Telesystem-Argo Global Capital, said of the transaction: “In the current investment environment it is more important than ever to be able to recognise the exceptional opportunities and VoluBill certainly presents one. o11 million is a lot of money for a start-up and with it we will come a long way. There will be no funding issues for the company for the next year or so.” Unless the company is ready to expand internationally and then it will need more capital. He added: “It is better to have a small team and money in the bank than a large team and little funds. First orders are expected to come in before year end and I am fully confident that we won’t have to worry about cash flow.”
Sofinnova Ventures principal, Eric Buatois said VoluBill has been lucky to secure such a significant first funding round. Now the company can concentrate on developing it products and establishing itself, rather than having the worry of chasing further rounds of funding.
The VoluBill management team boasts extensive experience in addressing the challenges that currently face telecoms operators and this no doubt was one of the major attractions for the investors. “Along with their expertise in international business development and strong product development focus, VoluBill’s leadership has the full complement of skills to successfully serve this market niche,” said Buatois.
The four-strong management team of Hewlett-Packard and Cegetel veterans comprises CEO and co-founder Andre Meyer; Nicolas Bouthors, vice president research and development who has submitted several patents, including those related to the VoluBill technology; vice president sales and marketing, Alain Lefebvre and Eric Mouette, vice president operations. From its history with Cegetel, the team has gained an in-depth understanding of the constraints and challenges of an operator. “That is invaluable and one of the reasons the company has been so well-received by investors,” said Meyer.
Meyer, who led the spin-out of the company from Cegetel has extensive senior management experience in the telecommunications and computing industries and prior to the formation of VoluBill was president of Cegetel Enterprises, the business branch of Cegetel. Before joining Cegetel he held various management position at Hewlett Packard, including general manager of the telecoms systems business unit, the worldwide telecom product division which he started in 1993.
“We started the technical development about a year ago and received backing from Cegetel of around EURO1.5 million.” He said that part of the attraction for the investors was the fact that VoluBill is a corporate spin-out. There is a viable product that is already working with a very solid management team. The VCs are taking less risk because it is not just a business plan on paper, but a fully operational business.
Corporate spin-offs are growing in popularity among VCs and the VoluBill deal is an example of how challenging market conditions are encouraging investors to seek companies with a proven technology developed within an established corporate environment. In VoluBill’s case, it was the credibility of its former parent Cegetel that attracted investors. But, says Meyer, there are positive and negative sides to being a corporate spin-out. “It could have been negative if the parent, in our case Cegetel, was too involved. It might have prevented us marketing to other operators.” Cegetel’s stake in the company will remain at 18 per cent a sufficient stake to maintain good relations while allowing VoluBill to gain its independence.
Telesystem-Argo Global Capital has experience of investing in corporate spin-outs and has a number of successes behind it such as Nortel Networks Fraud Solutions Group, which it acquired earlier this year and renamed Cerebrus Solutions Ltd. “We have had very good experience of spin-outs and are not afraid of them,” said Jormakka. “We have done so many. We know we can handle the issues even though it is tedious sometimes! It is a niche we feel comfortable in.”
He added that having the right partners of course helps, particularly when dealing with a French company. It is essential to have the support of a traditional French VC on board such as Sofinnova Partners to understand the French business culture. “You need a French VC to be successful in France,” he said.
And Olivier Protard, general partner at Sofinnova Partners in Paris, has faith that the company will be a success: “Detailed content billing will be one of the key success factors for the new generation of mobile services. The solution provided by VoluBill is well positioned to account for, certify and efficiently bill new data-rich services to the customers of cellular operators in Europe.”
He added: “We liked the fact that VoluBill is very focused on mobile network issues and has the ability to incorporate Internet technology into the cellular network. Also the fact that the company is a spin-off from Cegetel, and so understands the issues the mobile companies face.”
“Why VoluBill? Everybody we talk to is telling us the billing of content is the biggest problem in this sector. We know that the company is addressing a huge market,” says Vesa Jormakka. Argo Global Capital is well connected to the telecoms market: investors in its fund include some of the largest operators in the world and so among VoluBill’s shareholders are industry giants such as France Telekom and Deustche Telekom, which can only prove beneficial for the business. CEO Andre Meyer says: “It is very important for us that the VCs have a genuine interest and knowledge in the business sector. It opens the door for us and makes us credible.”
The most promising new revenue stream in this sector is content, but service providers know that effective and accurate billing for content has been almost impossible. VoluBill gives service providers the ability to analyse, in real time, the content accessed by each subscriber, enabling them to refine innovative pricing plans.
“The biggest challenge for the operator is the average revenue per user how do you increase this?” asks Meyer. “VoluBill is at the centre of this concept allowing the operator to charge for content.” There was a need to find a solution that measures the information crossing the airwaves and puts a price on it. VoluBill does just that in both the pre-paid and post paid environment. The company generates revenue from the equipment and software it sells, as well as constant support and maintenance for the equipment. Says Meyer: “In telecoms, the operator cannot afford to have a crash with equipment down for two hours.”
The aim of the model is to be up and running on an international level in the next few years. The company plans to sell in Western Europe for the first half of 2002 and by the second half of 2002, all going well, it is hoped a small team will be set up in the US. But this depends on what happens to the mobile Internet market in the US, says Meyer. “We have to manage our finances in a very conservative way we want to have sufficient gas to not need a further investment round before 2003. The EURO11 million should allow us to cover 2002, depending on the business climate.”
He added if business goes well the company may avoid going for a second round altogether and instead go for an IPO by the end of 2003 or the beginning of 2004. He said: “We are fairly optimistic about the market recovering. We are currently developing strong partnerships and have at least four that are in final negotiations and will be finalised before year-end.”
As far as competitors are concerned, there are some players in the market who don’t yet have the technology to track content, but who are well positioned to move into new mobile Internet application. Says Olivier Protard: “VoluBill has entered a very competitive marketplace with some very well established billings companies around such as US-based Portal System. But what is specific about these companies is that they haven’t yet addressed the billing of Internet content.”
He added that many companies with the same idea as VoluBill may not be able to penetrate the market because they don’t fully understand it. With its links to Cegetel, VoluBill is able to understand the issues from a business, rather than a purely technical, point of view.
According to each party involved in the venture, there is one US firm with the potential to develop a similar technology and is seen as the start-up’s biggest competitor. US-based Internet infrastructure company Narus is only targeting the fixed line market, but it is so close in terms of technology that it could move to the mobile wireless arena, says Jormakka. “They certainly have the understanding and would know what they have to do to move to the wireless market, but if they did decide to target this market they would have a tough time because they don’t have the same contacts as VoluBill through its connection with Cegetel,” he said.
Olivier Protard says: “Barriers to entry in this market are quite high you need technical expertise, but also a good knowledge of the practical and management issues that clients face.” Something that VoluBill is certainly not lacking. The billing space is indeed a niche, says Jormakka, but it is a very big niche to fill. “Billing is one of the biggest problems wireless operators have at the moment.” And VoluBill is set to rise to the challenge.