GroupMe, a service that lets users start a group chat using text messages, announced today that it has raised $10.6 million in its second round of funding — but it won’t be generating any kind of revenue any time soon.
The startup lets phone owners create a single phone number for a group chat. Whenever anyone sends a text message to that number, it’s sent out to everyone else in the group. It works for conference calls as well — anyone can dial into the number and start a group chat.
The first version of GroupMe was built over a weekend in May during a hackathon, a type of programming contest which challenges developers to swiftly create a working Web service, sponsored by TechCrunch, the technology blog now owned by AOL. Its creators famously drew offers for funding as soon as they left the stage.
GroupMe is built on top of a service provided by Twilio, a San Francisco-based startup which provides easy access to voice and text-messaging services which might otherwise be out of reach to small companies. Twilio has seen projects that use telephones to do anything from play tic-tac-toe to initiate group text messaging, has been particularly popular and even has its own seed funding program to go with it.
Right now, GroupMe doesn’t even generate any revenue — the service is completely free for users. Twilio, on the other hand, charges two cents to send or receive a text message, with potential volume discounts. Whatever GroupMe’s paying Twilio, it’s a cost that GroupMe appears to be bearing on its own for now. The development group doesn’t have any plans to try to develop a revenue-generating model in the near future. GroupMe has a few ideas like creating sponsored texting groups and brand groups. But that’s all they are for the time being — just ideas — said co-founder Jared Hecht.
“We compressed our 18-month road map into 9 months and we’re still finishing that up before we even consider thinking about revenue,” he said. “Obviously we are not focused on generating revenue right now.”
That didn’t stop Khosla Ventures or any of its other investors from throwing some cash their way. The group raised $850,000 in its first seed round of fundraising from the likes of Ron Conway’s SV Angel and Lerner Ventures. The most recent round of funding was led by Khosla Ventures, General Catalyst Partners and First Round Capital.
GroupMe brought on some pretty heavy-duty talent along with the funding as well. Jeremy Schoenherr, a former developer of Hot Potato and iPhone operating system iOS development expert, has come on board to help develop GroupMe’s mobile applications. Steve Cheney, a former writer with TechCrunch, also joined the team as a business development consultant.
Now that the “distracting” fundraising process is done and the company doesn’t have to worry about making any money for a while, it is turning its entire focus on improving the application, Hecht said.
“Now it’s product time, and it’s buckling down and spinning it out before we even consider finding a revenue,” he said.