Voice SMS, a technology that “doesn’t need VC”

We just checked in with Konstantin Othmer, chief executive at Palo Alto wireless start-up Core Mobility. He’s come up with something called the “Voice SMS,” which we discussed in today’s Merc — and he’s getting paid for every single message sent by a Sprint. He’s now working on deals with other carriers.

Othmer is his usual plucky self. He still insists he doesn’t want, or need venture capital. He’s one the entrepreneurs we mentioned in a piece over a year ago about how more Silicon Valley folks are avoiding venture capitalists. That’s when the valley was still in depression mode — and there was a palpable post-burst backlash against VCs.

Since then, Silicon Valley’s mood has lightened, and at least one of the start-ups we mentioned — Friendster — has taken VC afterall. Othmer, though, still isn’t convinced. He let a VC do some due diligence, and that produced an offer (termsheet), but “we decided to go it alone,” he says. Othmer fears VCs would force him to ramp up sales too quickly — while he prefers to focus on making one customer happy and successful before moving to sell to others. Sprint is that customer. He’s got 43 employees in Palo Alto and 7 in India, along with three dogs — compared to 20 employees two years ago. If he’d accepted VC, he might have been pushed to 100 by now, and scrambling to sell to multiple customers.

Where does this leave him? He’s spending about $6 million on his workforce, and bringing in slightly more in revenue — so the upside going forward depends on the success of his two products.

One is the Voice SMS, just launched. With Sprint already handling a billion (non-voice) SMS messages every six months, Othmer hopes Voice SMS (that’s Sprint’s name for it; Othmer calls it Vnotes) will get traction and pull in some good money. The other main product is Push-to-Talk, where Core Mobility is providing the technology to Sprint’s handsets. There, he’s going up against a venture-backed company, San Mateo’s Sonim, which just got $16 million in backing from Accel Partners, Apax Partners, 3i and BV Capital. Sonim has raised over $50 million in total and has 80 employees. Othmer isn’t dallying around. He’s already got three new carrier customers, in Canada, New Zealand and Mexico. And he’s announcing another one in Mexico next week.

Finally, he’s got another trick up his sleeve, which he can’t talk too much about. It’s called Carrier IQ, and he says enough is written about it at his Web site. Basically, though, it stems from his discovery that poor cell-phone reception may not stem from bad coverage per se, rather from sub-par handover technology between towers. The Merc recently wrote a piece about the terrible coverage in Los Altos Hills. Othmer, though, lives in the area. He found that the hills often meant cellphones pointed down into the valley, and talked with towers along the 101. When Los Altos residents travel, their carriers seek to switch to another tower, and calls are dropped even though the next tower is in front of them. It happened to him: “I could actually see the tower.” The problem, he said, was that 101 towers didn’t have local Los Altos towers on their “neighbor” list.

Othmer certainly has the energy. He’s is in endless meetings, and we found the only way to reach him was when he reponded to our request to talk with — surprise — a Voice SMS, training us to respond to it. Othmer doesn’t do any PR. But wireless is a competitive place to be right now. It’ll be interesting to see if Othmer’s non-VC strategy works out. Stay tuned…