On funding Burner's future

My co-founder Will and I started Ad Hoc Labs (that’s our corporate name) with a strong opinion that the phone number as most people know it today is fundamentally broken.  It’s not smart enough, social enough, and it’s definitely not privacy-aware enough.

It took us a couple of experiments attempting to address various aspects of that abstract statement, but when we came up with the concept of Burner, it was instantly obvious it had legs.  We went from bugging our friends and family to install and use our alphas, to people asking us when they could get access to the Burner alpha.  

We showed a very (very) pre-release prototype of it to some of our friends at SXSW in March 2012, and within hours it was demoed on a panel, tweeted about (thanks Ted!), and we were scrambling to put up a Launchrock page to collect emails from interested folks.

That proof-of-concept prototype has gone through a lot of evolution since then -- in fact it was just named a top 50 app of 2013 by TIME and is now a well-established and fast-growing business.  

Today we have some big news to share about our future, but first I want to talk a little bit about our past and our approach to things.

NO MONEY, NO PROBLEMS

When we first launched the app, we charged for it because we had to -- phone numbers cost money, and we didn’t have any.  We were in full bootstrap mode, having started the company months after leaving our day jobs, with no outside money.  This turned out to be a very good constraint for us, because we’ve had to balance growth and revenue -- basically to act like a business -- every day ever since.

After an unexpectedly successful user and media response to our launch, we were even able to raise a little capital from professional angel investors like Dave McClure, David Cohen, and a handful of angels who really believed in us and our vision of mobile identity.  We made the rounds of some of the usual suspects, local players here in LA, and so on, but interestingly enough, nearly 100% of the people who pulled the trigger were people who knew and believed in us personally.

We raised this first round as a convertible note.  For those of you who follow the inside-baseball debates on the merits of notes vs. equity, let me tell you, one thing people don’t often talk about is how loose they are from a governance point of view.  After issuing notes, my co-founder and I still owned 100% of the stock of the company and had a one-person board (me).  We could basically do whatever we wanted.

On the flip side, there was a lot of personal credibility on the line with our investors.  So we had enough money to build out the team a little, to invest in things like customer service and community management, and even to pay our office rent -- but not enough to go on a marketing spree or make everything free or anything like that.

We continued to grow our business deliberately, get feedback from our users, fix bugs, polish the app and, whenever we had leftover time, experiment with and build out new features for our users.

FREE TO BE YOU AND ME

Earlier this year, after a lot of experimentation, we got comfortable with the free download / free-trial number approach that our pricing follows today.  Basically we give away a lot more copies of the app and a lot of free-sample numbers (which cost us money), but enough of the people who try our app like it and eventually pay us that the net effect of being free is hugely positive for our business.  

We like being free philosophically too -- we never wanted to have an experience that people would have to pay for up front without knowing what they’d get, or a free app that had no utility until you fed the meter.

Going free was a huge step for us -- and, more importantly, it helped us continue to grow our revenue base.

A CAPITAL ADVENTURE

While we never set out to raise venture capital as a primary goal, as the business grew it became increasingly clear that it was a real option.  We thought long and hard about it -- after all, we had options given the revenue we were generating. We could have kept things lean and built the business out of current revenues.  We could have rounded up more convertible note investment.

But ultimately we concluded that the vision we set out with -- a better, smarter phone number -- was best served by accelerating our growth with smart, committed, professional venture capital.  I’m pleased to share the news today that we’ve taken a $2 million investment to fund our future growth. More importantly, we’re doing so because we found passionate investors whose visions match ours, and who are bringing their financial and strategic resources to the table.  

Founder Collective are exactly that -- a network and partnership of tech entrepreneurs who’ve done it before and are maniacally focused on helping early-stage companies.  Venrock are one of the most established, enduring venture funds out there.  David Frankel and Marissa Campise, our partners at those funds respectively, are smart, driven, and believe in our vision.  We’re lucky to have them joining our board and rolling up their sleeves to help us achieve it.

Several other boutique funds and smart angels are joining our mission as well.  Miramar Digital Ventures is a new, mobile-focused fund from the folks at Miramar Venture Partners, who have deep telephony roots.  TenOneTen is a new vehicle from LA-area angels Gil Elbaz and David Waxman.  Semil Shah’s Haystack and Emil Michael round out the syndicate.  We feel very fortunate indeed to have the involvement of investors with such a diverse set of perspectives and relationships.

THE FUTURE OF BURNER

Our mission is to create tools that empower consumers by giving them better control over their privacy, communications, and identity.  

This is a big, bold vision -- but we also believe it’s a very ripe opportunity.  

Consumers want and deserve to control their mobile identity. Burner today gives users power over the ‘who, when and how’ of their phone numbers and their voice and text connections.  Our new iOS 7 redesign moves beyond disposable phone numbers and makes Burner faster, more elegant, and easier to integrate into your day-to-day communications.

We think we’re off to a good start.

--Greg Cohn, co-founder

PS:  we're hiring!