In June 2011, Metago, maker of the popular Android file management app ASTRO, announced a $550K series A equity investment by Kii Capital. Metago has been at the forefront of developing Android end consumer apps since 2009 and had just crossed the 11M user mark, now growing at more than 1M users per month.
Kii Capital is an early-stage venture fund, which invests exclusively in mobile consumer apps which have demonstrated good user traction. Together with its corporate Limited Partner, Kii Corporation, a mobile technology platform provider, it offers a unique mix of financing for startups as well as a host of technology resources and channel access to rapidly scale mobile app businesses.
When Kii Capital approached Kevin Payne, Metago’s founder and CEO, the two parties immediately saw the benefits of working together. Financing through Kii Capital would allow Metago to expand their business, bring several part time people on board full time, hire additional developers, and move into larger offices in the Northern Atlanta, GA area. Also, Kii Corporation’s technology would allow Metago to add a cloud component to the then on-device only file manager allowing users to backup and share their files directly from their handsets with anyone they choose. Based on installations with 20M Daily Active Users (DAU) in Japan and beyond, Kii technology has already been proven to be robust and scalable, running for four years without a single day of downtime or any data losses. Not only would this enhancement strengthen the value of ASTRO to its end users, but a cloud component would also increase stickiness amongst users and allow for additional revenue streams from file backup, similar to Dropbox.
“We were cash flow positive and growing our revenue organically, but our downloads really exploded,” says Kevin Payne. “We saw we would need to take advantage of this unique position we have gained in the app marketplace fast, before others would leapfrog us. We could have received financing from many sources. However, we really liked the unique combination of VC-style financing and the laser-like focus of Kii to simultaneously provide technology and channel access for mobile consumer apps to scale rapidly.”
Shortly after being backed by Kii, for instance, Metago was seeing itself with more bargaining power in negotiations with major handset manufacturers and operators, extracting price and branding concessions which they felt were unachievable before, when they were still a small venture living from a tight cash flow with a part-time sales representative.
“Kii Capital is looking to fill the space between angels, which spread their investments over many dozens of companies in many different spaces (and often don’t follow up), and VCs, which have to deploy a lot more capital to justify their 2% annual management fee than these companies need (leading to dilution),” says Christof Wittig, managing director at Kii Capital. ”The beauty of mobile consumer apps is that the market is extremely open and competitive, but also global, viral and very very large. So a good investment is the one that got the product/market fit right and is nothing short of awesome to its users, which can easily be measured in user traction. That one doesn’t need a lot of money, but a steady hand and experience to scale and avoid missteps. That’s what we seek to provide at Kii Capital.”
Christof Wittig - http://www.linkedin.com/in/christof
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