Jennifer is the co-founder and CEO of Paloma Mobile, a mobile start-up creating cloud-based services for entry-level smartphones in developing economies such as Indonesia, the Philippines and Latin America. She lived and worked in the Silicon Valley for 10 years where she founded and successfully exited three digital companies, including Xumii, a cloud-based mobile social messaging service sold to the Zurich-based software company Myriad Group.
Jennifer is an advisor on mobile and digital investments for Bullpen Capital.
Paloma Mobile was Scale Investors' first investment.
Q. Tell us about Paloma Mobile
Paloma Mobile is an innovator in data efficient mobile transfers. Let me tell you why that is important. Qualcomm has alerted us to the fact that mobile data is about to increase a thousandfold. While that is not a problem for us in Australia it's something that very much impacts developing nations where the infrastructure is not ready to cope with the voracious appetite we have for videos, photos and just consuming data on mobiles. On top of that, an estimated three billion smart phones will be flooding into the market by 2017 so you have this incredible confluence of events creating a problem that needs to be solved.
Developing nations are our target audience. Our challenge is to deliver mobile services to the emerging middle classes getting their very first entry-level smart phone. We have created the world's first cloud-based, data-efficient mobile network that delivers applications and services over very unreliable networks with carrier-grade service quality.
Q. Which emerging nations are you targeting and why?
We are focused at the moment on South East Asia; we are working with the top three mobile operators in Indonesia, we're also working with a very large operator in the Philippines and we are just getting ready for a rollout throughout all of Latin America. Our go-to-market is through mobile network operators.
Q. What sort of services and applications are you providing in these markets?
Those that require a lot of image transfer – whether it's photos, videos or anything that requires data efficiency. Because we are able to move very small packets of bits and bytes around means we can download on 2G networks. Even if the network drops out we can resume very efficiently. This is really a customer service experience; it means the end user has a great experience on any of the mobile operators using our applications.
Also, that data efficiency drives price disruption. Because we are not using a lot of the network, the mobile operators can price our services very affordably with a two to six times margin on the network data. Consumers in developing nations can actually afford to use these services because they are priced so cheap.
Q. How would you describe funding opportunities for start-ups in Australia?
There is good news and there are things we can do a lot better. When I started my first start-up in 1997 there was no one in Australia really funding start-ups. So I set off to Silicon Valley for a decade or so to grow and develop several companies. The good news is that in Australia at the moment the ecosystem is really growing. We are seeing so many incubators, start-up groups, hackathons and more importantly, entrepreneurship has become a legitimate career path. It is something people in universities are aspiring to do. I think that is incredibly exciting.
The room for improvement is in four areas. I am going to characterise them as liquidity, complacency, platforms and VCs.
The biggest problem we face with funding in Australia is that we just don't have the liquidity you have in Silicon Valley. This means that the venture capital community is driven to be conservative by nature. The type of companies they look for are B2B [business to business] and they keep asking 'When are you going to break-even?' You contrast that with Silicon Valley where they are hunting for unicorns and throwing cash at companies to help them scale and become successful. It is quite a different atmosphere.
Complacency is a very interesting thing. In Australia it's not that we don't have the technical chops or the entrepreneurs with ambition, but we lack a competitive cauldron. I lived in the belly of the beast in Silicon Valley for a decade and you can taste the competitiveness. You are always striving to do better, hire a better team, solve a bigger problem, work longer. And it is in every walk of life. In Australia we really lack that; our entrepreneurs need to be in more of a competitive environment to help them push and strive and solve bigger problems.
The third is around platforms. Only three countries in the world have companies that have delivered platforms to the scale of Google or Apple – Silicon Valley [USA], China and Israel. The reason platforms are so important is because they spin out people with skillsets we just don't have in Australia. It's very hard to find great product managers, great product marketers where they can interpret technology into marketing. Unfortunately any of the big platform players we have had – like Atlassian – have had to go overseas for more funding, so they are more of a US company now. If we could invest in companies that could be the next Google it would really change the nature of the industry in Australia.
Our friends, the VCs, are number four. We lack the depth of talent within the venture capital community to select, and more importantly grow, these great companies. I sit on the advisory board of a venture capital company in Silicon Valley and our deal pace is probably 20 plus deals a year. You contrast that with Australia where most venture capital companies wouldn't do that amount of deals in the lifetime of their fund. So they again become very conservative. It means that in their eight to ten deals, one or two of them have to be hits. It drives a very different behaviour in the way they select, manage and grow a company. They are always managing for the downside; they are not swinging for the fences.
Q. Is the funding landscape improving?
We fund at the lower end; there is a lot more money available at the incubator start-up stage and we are seeing more corporate funds coming along with their own internal incubators, trying to disrupt the disruptors. From that point of view I give us [Australia] an A triple plus. But where it falls down is funding after that, the middle tier. Paloma is falling right into that funding hole. We have gone through our seed capital, we are now looking for a larger round, somewhere between two to five million dollars. In that band there are very few companies you can go to in Australia. This propels us to look overseas. As a result, the IP, the GDP contribution, everything moves overseas.
Q. Can you describe the relationship between Paloma and Scale Investors?
The relationship between Scale and Paloma is one I have not had with a group of investors before [because] this is the first time I have taken angel investment. Typically I always raised money from institutions and venture capital companies. We were the very first company Scale invested in. For many Scale investors we were their first entry into the start-up world. What they lacked in experience in start-ups they absolutely made up for in connections, networking, support and enthusiasm. These are all the things an entrepreneur needs. Some of the Scale investors are on boards of the largest Australian companies and so I have access to this amazing brains trust.
Scale has delivered us the Chairman of our company and we have an observer from Scale on our board. There is no end to the lengths they will go to assist the company. If I put my hand up and say I need some legal expertise the next thing I know is I have three emails from the Scale network asking 'What area? How can I help you? Here is when I am available…'
Q. What next for Paloma Mobile?
What's next is for us to continue on the path we are on. We have been successful in two specific areas. One is the technology, we are now deployed to over 300 million mobile consumers around the world. The technology works; we have proved the data efficiency of the platform and the fact that it is price disruptive. So we will continue to tune the data efficiency and add other layers that are important to mobile consumers in these developing nations.
The second area is contracts. For a very small company based in Australia, we have been able to secure some amazing contracts with the largest mobile network operators in each of the countries we work in. We now have a contract that will be rolling out through all of Latin America and we also have Huawei waiting in the wings to do a global contract with us for some other countries. So we will be pursuing those contracts aggressively and working on our rollout to the rest of the world.