Interesting People mailing list archives
Why Helio Didn't Connect
From: David Farber <dave () farber net>
Date: Thu, 3 Jul 2008 03:20:01 -0700
________________________________________ From: Robert J. Berger [rberger () ibd com] Sent: Thursday, July 03, 2008 1:40 AM To: Dewayne Hendricks; David Farber Subject: Why Helio Didn't Connect The "money" quote: "If you look at wireless as a whole, it's represented a net destruction of capital for venture capitalists," grumbles William Frezza, a general partner at the Boston venture capital firm Adams Capital Management. I suspect this is applicable to most wireless investments, even those beyond non-monopoly Cellular like Helios. I've now seen it personally at several in the Muni-WiFi realm and I think were going to eventually see it with wImAx. Infrastructure plays do not generate ROIs that Wall Street expects except for monopolies. - Rob ---------- Why Helio Didn't Connect The flashy cell-phone company is in a very tough business. By Michael Fitzgerald Thursday, July 03, 2008 http://www.technologyreview.com/Biztech/21036/?nlid=1187&a=f Helio, which aimed to use souped-up mobile devices and spiffy services to build a virtual mobile phone company, instead has been sold off for a fraction of its backers' investment. Helio thus becomes the latest reminder that the wireless industry remains a perilous place for startups. "If you look at wireless as a whole, it's represented a net destruction of capital for venture capitalists," grumbles William Frezza, a general partner at the Boston venture capital firm Adams Capital Management. Despite receiving some $710 million in capital, Helio was able to attract only about 170,000 customers, racking up significant losses in the process. The trouble was not a lack of innovation. Helio's May 2006 launch saw it put two twists on the market for virtual mobile phone companies: it offered high-end cell phones with unique services, like integration with MySpace and YouTube, and the ability to make micropayments via the phone. And where other virtual mobile providers (also called mobile virtual network operators, or MVNOs) went after underserved niches, Helio rented space on Sprint's cellular network and then used it to go after a mainstream cellular market: young people. Helio had big backers in Earthlink, a successful Internet service provider, and South Korea's SK Telecom, and it was headed by Sky Dayton, Earthlink's wunderkind founder. Helio entered a market filled with froth: less than a year earlier, Sean "Diddy" Combs gave a keynote to the 2005 Cellular Telephony Industry Association trade show and said, "I am an MVNO." One virtual phone company that has had success is Virgin Mobile USA, which bought Helio for perhaps $49 million--$39 million in stock and the assumption of as much as $10 million in debt. Helio itself is not dead: Virgin Mobile will continue to market its service. But observers say that the deal strikes a death blow to the idea that U.S. consumers will buy high-end mobile phones from someone other than a cellular carrier. "The chapter closes on this market, and it's turning the page," says Chetan Sharma, president of Chetan Sharma Consulting, based in Issaquah, WA. Sharma says that Helio would have needed a million customers to get to a break-even point. <snip> –––––––––––––––––––––––––––––– Robert J. Berger - Internet Bandwidth Development, LLC. 15550 Wildcat Ridge, Saratoga, CA 95070 Voice: 408-838-8896 eFax: +1-408-490-2868 http://www.ibd.com ------------------------------------------- Archives: http://www.listbox.com/member/archive/247/=now RSS Feed: http://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com
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- Why Helio Didn't Connect David Farber (Jul 07)