The archive · Consumer Apps · Strategic decision · 2010–2011
GroupMe's SMS group-messaging bet ends in Skype's August 2011 acquisition
GroupMe turned group texts and free conference calls into an everyday mobile service, raised $11.45M in a year, and was acquired by Skype in August 2011.
GroupMe
What the business is
GroupMe let people create private phone groups on the fly, text the whole group at once, and start free conference calls—group messaging as a standalone mobile service.
Starting capital：$850,000 seed from Betaworks, SV Angel, First Round Capital, Lerer Ventures and angels; then $10.6M from Khosla Ventures, General Catalyst and previous investors.
How it started
GroupMe was born at a hackathon at TechCrunch Disrupt in New York in 2010, founded by Jared Hecht and Steve Martocci. A couple of months after Disrupt, the company closed an $850,000 round from Betaworks, SV Angel, First Round Capital, Lerer Ventures and prominent angels.
What happened
Early in 2011 GroupMe raised $10.6 million more from Khosla Ventures, General Catalyst and previous investors. By the time of the deal it had twenty employees staying in New York, and Skype CEO Tony Bates had been talking to the company for a few months—around the same time Skype was negotiating its own acquisition by Microsoft, which was still pending when the GroupMe deal was announced.
How it ended up
Skype announced on 2011-08-21 that it would acquire the one-year-old GroupMe; terms were not disclosed. GroupMe would remain a standalone brand in New York while Skype looked for integration points over time, with Bates calling group messaging one of the most important markets for Skype and mobile the path to one billion users.
Background
GroupMe was born at a hackathon at TechCrunch Disrupt in New York in 2010, founded by Jared Hecht and Steve Martocci. The product let people create private phone groups on the fly, send text messages to the whole group, and set up free conference calls—group messaging as a standalone mobile service rather than a feature inside a social network.
A couple of months after Disrupt, GroupMe closed an $850,000 round from Betaworks, SV Angel, First Round Capital, Lerer Ventures and prominent angels. Early in 2011 it raised $10.6 million more from Khosla Ventures, General Catalyst and previous investors. By the time of the deal the company had twenty employees and was staying in New York.
Skype CEO Tony Bates said he had been talking to GroupMe for a few months—around the same time Skype was negotiating its own acquisition by Microsoft, still pending when this deal was announced. He framed group messaging as one of the most important markets for Skype, called GroupMe a very sticky, everyday form of communication, and pointed to mobile as the way to Skype's goal of one billion users.
On 2011-08-21 Skype announced it would acquire the year-old company; terms were not disclosed. GroupMe would remain a standalone brand while Skype looked for integration points over time.
What has to be true
- Group messaging sat between SMS and social networks, and nobody owned the private phone group, so a product with no head start could become the default behavior in months.
- The behavior proved sticky and everyday: Skype's own CEO called group messaging one of the most important markets for Skype and mobile the path to one billion users.
- Speed compounded trust: $850,000 within months of founding and $10.6M by early 2011 let GroupMe hire twenty people and stay independent long enough to be acquired, not crushed.
What can be applied
Win the habit before the giant sees it: GroupMe made group messaging an everyday behavior in a year, so Skype paid to own it instead of building it.
Aftermath
As of 2011-08-21 GroupMe had just agreed to be acquired by Skype: terms were undisclosed, the twenty-person team stayed in New York, the service kept its standalone brand, and Skype planned to find integration points over time. The Microsoft-Skype acquisition was still pending when the deal was announced, so GroupMe's longer-term ownership was not yet settled in this batch's sources.
Sources
- Skype To Acquire Year-old Group Messaging Service GroupMe
- Skype to acquire year-old group messaging service GroupMe
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