Only three years after the first acquisition Yello Mobile has raised $78M, is nurturing an alliance of 35 startups, is profitable to the tune of $1.5M per month and plans to IPO next year. This is surely one of the most exciting startup stories in Asia this year.
Here is part one of a two part article about their founding story, growth, and ambitious plans for the future. Part 2 coming tomorrow.
What is Yello Mobile?
Yello Mobile, similar to IAC or WPP, is an umbrella company that acquires mobile startups. Their mission is to create a mobile platform company that services consumers across a wide range of industry verticals in the mobile space. Unlike IAC and WPP however, Yello Mobile does not integrate companies into the umbrella company, but rather works to maintain the autonomy and independence of the founders and the company cultures they have nurtured. By guaranteeing independence it is expected that founders will remain with their startups long after acquisition, a core requirement for Yello Mobile’s sustainability. Their aim is to become the dominant player in the mobile landscape in Asia.
“Our company is like a religion for our entrepreneurs. Our alliance is like a religion. If we are more dedicated to our religion, then we become more successful and sustainable.”
Yello Mobile’s CEO had experienced selling a startup in 2011 to Daum Communications, Korea’s second largest internet portal. After the acquisition he soon felt trapped by the corporate environment, as his team and technology were integrated with Daum’s. This was not the independent life he’d craved as an entrepreneur and he felt there was another way.
Yello Mobile was launched on the vision that acquisition could be made, while retaining the key elements of entrepreneurship that first inspired the startup founders. As a first step Yello Mobile built alliances with 5 startups and validated the core hypothesis of working together while maintaining independence. The next step was to raise funding and accelerate growth.
“We are hyper-focused on guaranteeing independence for our companies. We don’t integrate at all, but encourage strong collaboration between them. This facilitates rapid growth for the startups and for Yello Mobile. That’s how we can attract the best companies in each vertical.”
The company’s first investor was DSC, who were convinced by the team’s vision and ability to execute. With this cash injection the company was able to grow more rapidly, focusing on building alliance partnerships with top startups across a wide range of verticals.
Which Verticals Will Be Served?
While three key market verticals (Mobile Media, Digital Marketing and Mobile Travel), were the initial focus, their vision has expanded to encompass all mobile services, apart from messaging and gaming. Their hope is that mobile users across Asia will interact with their services from the time they wake in the morning, until they go to bed at night.
“Our CEO sold first company to Daum Communications in 2011. But working in Daum he lost his entrepreneurial way and became a ‘business man’. He did not want that to happen in Yello Mobile.”
Acquiring 35 companies in three years for a ‘startup’ is no easy feat. Jason explained that their acquisition structure is focused on stock swapping, rather than the outright purchase of company stock. Under this structure, founders are given a real stake in the future of the company, rather than a payout for their technology or team. This encourages founders to stay on-board for the long term.
“We focus on collaboration, not integration. So it’s not really M&A, but rather alliance-building.”
This format also has obvious financial benefits, allowing Yello Mobile to focus spend on growth, rather than paying off founders. Ultimately, as startups in the alliance grow, their wealth is aligned with the wealth of the company, so they keep their motivation and entrepreneurial spirit and are motivated to continue to grow with their startups.
Benefits of Joining Yello Mobile
Startup founders are a rare breed who are bold and crazy enough to want to go it alone and build the future the way they want to see it. Why would top entrepreneurs be so willing to join an alliance, that could cramp their style, I asked Jason.
He explained that Yello Mobile can convince founders that the risks of staying out of the alliance are much greater than the risk of joining. They are acutely aware of the danger zone around three years after founding, where many startups run out of money or are unable to scale faster than the competition. This is the stage at which Yello Mobile offers the most value. They can provide financing, HR support and extensive marketing and localizations support for regional growth.
“If we go alone it would take a long time to build our vision, but united we are much stronger, and can build much faster.”
In addition to an internal team of around 40 developers, designers and product managers, the benefits of creating synergies with other alliance companies is striking. For example one of their startups is particularly strong in the Chinese market, so is helping other alliance members also enter. These benefits allow startups to focus on growth. And it enables them to build much faster than if they were alone. As well as intangible values, companies even share traffic and talent, and in some cases engage in cross-marketing.
“Product quality improves much better much more quickly. Our in-house staff really help with this. Startups have a hard time to hire top developers, designers, and product managers. We help to solve that problem.”
The biggest benefits though, were sustainability and potential for growth. The benefits presented by the alliance, that ultimately allow founders to concentrate on what they do best, is why founders are joining the company.
Incubator, Accelerator, Umbrella Company, VC Investor, Marketing Partner, And More
At several stages during our discussion it became clear that trying to compare Yello Mobile to existing organizations was futile. The company is breaking new ground in Asia and they are keen to avoid being pigeon-holed as this or that type of company.
“We are integrating the value chain into 1 company.”
As well as running a VC fund, the company also makes angel investments in early stage companies. These may or may not become fully fledged members of the alliance, but are also nurtured. Yello Mobile is also not exclusive in its investment strategy, welcoming external VCs to participate in follow-o funding for alliance companies. They also operate as an incubator for later stage companies and as an accelerator, in the early stages.
“We don’t advertise Yello Mobile though, we just support our services.”
Yello Mobile is an umbrella company, but doesn’t advertise itself as the service provider. Instead each brand they own remains its distinct individuality. This will mean that end users may not know they are using a Yello Mobile service. It also ensures that the entrepreneurs remain the focus of their companies, rather than a corporate entity.
“Somewhere between an acquisition, partnership and alliance. Yes, it’s in the middle of somewhere.”
This is part one of a two part article about their founding story, growth, and ambitious plans for the future. Part 2 coming tomorrow.