VCs Back Location-based Services
By Sean Wolfe
Location is everything. That rule applies not just to real estate—it’s also what companies and their investors are counting on as the mobile and Internet spaces converge.
One case in point is the recent funding of Eagan, Minnesota-based Gearworks, which recently got $21.4 in a third round of financing from new investors Rho Ventures and Split Rock. The bet there is is that businesses will want to use location-based mobile applications to supervise mobile workforces and field-based activities.
The business case is twofold: Because the applications can be deployed through off-the-shelf cellular phones, carriers realize more revenue per user.In turn, Gearworks realizes returning revenues from its software-as-a-service model.
The company already has three major carriers as partners—including Verizon Wireless Sprint, and SouthernLinc. Application vendors for Gearworks include software-as-a-service players like Salesforce.com, Points North, and TLMLink.
On the customer front, companies like Pepsi Bottling Group, Select Comfort and Roto-Rooter are using Gearworks’ technologies and services to route deliveries and deploy service workers to customers.
“There are a number of companies that are all focused on building the new mobile Internet, and I think we’re at an inflection point in the market where it’s finally attracting a lot of attention and capital,” noted Todd Krautkremer, Gearworks’ CEO. “Right now, we’re at a place where anybody that has the desire to deliver mobility and location-intelligent mobility to the mass of white, grey, and blue collar workers will be either a collaborator or a potential competitor of ours.”
By that measure, count Airclic, another recently funded firm, as potential competitor or collaborator. The Newtown, Pennsylvania-based firm raised $12.5 million in a third round of funding from JMI Equity along with prior investorsMotorola, and Zon Capital Partners.Airclic’s idea is to equip wireless devices like mobile phones and PDAs with barcode readers, add on global positioning tracking and connect those inputs to their backend systems that allows companies to track who scanned an item, when, and where they were at the time. Again, it’s a software-as-a-service model, and Airclic sees in supply-chain management, service technicians, and retail.
“We’re making the cellular phone into a business tool,” noted Airclic CEO Tim Bradley. “We’re trying to take all those issues keeping companies from adopting this model, by taking away the cost of hardware and the infrastructure. We can deliver it to businesses now for $300 or less per user, and applications can be delivered to a customer over the air, literally in days. Ultimately we think the cell phone will be the main transaction vehicle for customers in the field.”
Both Gearworks and Airclic have managed to attract a healthy amount of attention from venture capitalists. Airclic has raised a total of $23 million to date, and believes this will be its last round.Similarly, Gearworks has managed to attract $56.4 million in total capital, also likely to be the last it needs.
Both companies face execution challenges in terms of rolling out new services to meet customer demands quickly enough, and to that end are using the funds to build out products and sales and marketing teams.
What’s clear is that the the market for handset-based LBS (location based service) applications is likely to grow quickly over the next three years.A recent study by ABI Research notes that worldwide carrier deployments of LBS handset applications will top 144 million subscribers by 2010, with 76 million expected to be deployed within business customer environments.
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