FreedomPop, the startup disrupting the businesses of traditional mobile carriers by giving people ways to use mobile devices free of any charges, is today adding another sizeable round to its coffers. The company has raised $50 million to continue its global rollout beyond its home market of the U.S. and to help launch new international products. The products include a new “free hotspot” that will actually cost $49.99 initially but then gives users free data in 25 countries and a SIM that will give users access to free calls and data on their handsets across multiple regions, starting first with a $10 SIM covering Europe.
All that co-founder and CEO Stephen Stokols would tell me is that it’s a very large financial player, a private-equity group, that does not want to reveal its name until later because there are also plans for it to integrate FreedomPop with another company that it is in the process of trying to acquire. (My guess is that the acquisition is of a carrier.)
We’ve also heard that the investor is potentially involved in the next round being raised by Uber that values the transportation company at $62 billion (it would be a first-time investor, and frankly if you’re a huge private-equity firm that is exactly who you would be looking to fund, so perhaps no surprise there).
The valuation with this latest round, Stokols says, is “significantly higher than the last round, below $1 billion but we are approaching it.” It brings the total raised by FreedomPop to $109 million.
The new investor may plan to integrate FreedomPop with other assets in its portfolio, but even without that, the startup has been making some significant headway in working with carriers and growing at home and globally, both under its own brand and as a silent partner providing the tech to underpin carriers’ own “free” offers to target new demographics of users.
(As we’ve explained in the past, FreedomPop is not your traditional MVNO. It gives away bundles of data, voice and text and upsells on extra data, voice minutes, voicemail and other services.
But it does something else, too: Most “virtual” operators essentially buy minutes, messages and data in bulk from carriers for their services and then resell these to their customers, which translates into thin margins for those MVNOs.
FreedomPop, however, buys only data which it then uses to offer the rest of its services — for example, voice as VoIP. Instead of prebuying in bulk, it negotiates different usage tiers and pays only for what its customers use. More recently it has been working on ways of using this technology directly within carriers’ networks to build new services for them, giving FreedomPop a more diverse revenue base in the process.)
Stokols said that so far, its international expansion has been strong. “The UK market [its first international market outside the U.S.] is going extremely well,” he said, with the conversion level already at 45 percent after launching last year (it took years to get to 50 percent in the U.S., he noted, and rates have to be at 30 percent “to make the model work”).
FreedomPop works by way of a SIM in the UK market and those have actually sold out at the moment. The projection now is that the UK will hit 1 million users in 18-24 months. Right now the whole service — U.S. and everything else — is just over 1 million users in total today.
The plan is to be in one more new market by the middle of this year with its full offering, but in the meantime it looks like there will be more opportunities to use FreedomPop’s other services. The global hotspot aggregates cellular capacity in 25 countries for UK and U.S. users to use data for free in all of them.
At first, it will cover the U.S., the U.K., France, Germany, Italy, Spain, Switzerland, Austria, Netherlands, Belgium, Luxembourg, Sweden, Finland, Norway, Denmark, Ireland, Portugal, Greece, Poland, Hungary, Slovakia, Croatia, Romania, Bulgaria and Czech Republic; and it will expand to 40 countries by the end of this year, including Asia and Latin America.
The SIM, which costs $10, will provide phone coverage in Europe.