Deutsche Telekom’s VC Firm Makes Strategic Investment In Pinger

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For the last few years we’ve been tracking the growth of a service called Textfree, offered by San Jose-based startup Pinger. As the name implies, Textfree has a very attractive value proposition: you sign up, it gives you a free, real, telephone number, and you can send text messages and make phone calls with it free of charge — the service makes most of its money by displaying ads alongside the texts.

It’s also massively popular: last month alone, users sent and received a total of 2 billion text messages, and it’s one of the most downloaded iOS apps of all time. Even more impressive is the fact that the vast majority of their efforts have been concentrated in the U.S. alone — Pinger is preparing to sweep across Europe this year.

Pinger’s service is potentially disruptive to the telecom world, which is why it’s so notable that the company is now getting in bed with one of the biggest names in the business: it’s raised a $7.5 million funding round led by T Venture, the VC arm of international carrier giant Deutsche Telekom. T Venture’s Investment Director Bernhard Gold will be joining Pinger’s board as part of the deal. The company had raised around $11.5 million prior to this round.

So why, given its disruptive nature, is Deutsche Telekom actually supporting Pinger, with plans to look for various partnership opportunities down the line? Pinger CEO Greg Woock sums it up pretty nicely: “They hate us the least.”

You see, there are several popular services these days that take advantage of the rise of smartphones and VoIP — like Viber and even Skype — which essentially live ‘on top’ of the carriers, without actually using their traditional ‘minutes’ and SMS allotments (instead, they operate via data connections). The downside to these is that users can only communicate with contacts who also have the service’s client installed (or, in the case of Skype, they can pay extra to get a ‘real’ phone number).

Pinger’s Textfree, in contrast, has more in common with the traditional way of doing things. Because you’re given a real phone number when you first sign up, anyone can text or call you without having to download an app themselves. And this traffic doesn’t bypass the carriers’ networks, which means they can still make some money.

I spoke with Bernhard Gold, who is leading the investment. He says that at the end of the day, he’s looking to make money with the deal (in other words, this isn’t a purely strategic move), and he thinks Pinger offers a very strong value proposition. But he adds that because Pinger is operating on the carriers’ infrastructure, it stands to be strong as a partner rather than a competitor. Expect to see a number of integrations and partnerships announced in the coming year.

Pinger is also testing a promising version of its service in Germany right now, which it plans to roll out more broadly in Europe this year. Because of the way carriers pay each other in Europe, offering a free texting service in Europe is a much trickier affair than in the U.S. But Pinger has figured out a way to encourage users to send and receive an equal number of messages, which negates the costs it would otherwise need to pay.