2 Comments

Summary:

Karma not only encourages its 4G customers to share their connections with strangers, it rewards them with free bandwidth for doing so. The Dutch transplant’s social bandwidth vision now has a new convert. Venture capital firm Draper Fisher Jurvetson is participating its seed funding round.

Karma staff MVNO
photo: Karma

Updated. Karma, a new virtual mobile operator that encourages customers to share their 4G connections, has a new investor: Draper Fisher Jurvetson, the venture capital firm that invested in big in SpaceX, Tesla, Box, Yammer and several greentech firms.

DFJ’s official Twitter account revealed the investment Monday morning, and when contacted, both DFJ and Karma confirmed that the venture capital firm has joined the virtual carrier’s $1 million seed round. According to Karma, investors include TechStars’ Adam Rothenberg, David Cohen and David Tisch; Amazon’s Werner Vogels, Trisiras Group’s Kal Vepuri, BOLDstart Ventures, 500 Startups, and Collaborative Fund.

DFJ gave us the following statement:

“DFJ is excited to announce our participation in Karma’s seed round of financing. The value proposition of social bandwidth was compelling to us, as bandwidth is a key factor in future of mobile internet. We look for innovators that have the potential to change and advance an industry, and we were excited by the potential of Karma.”

Karma, an Amsterdam startup that relocated to New York City, has yet to launch, but it has said it will sell 4G mobile hotspots, acting as a mobile virtual network operator (MVNO) on Clearwire’s WiMAX network. It’s part of a new wave of data-focused MVNOs challenging accepted carrier business models, but Karma’s operational model makes it particularly unique.

It will sell pay-as-you go no-contract data plans, but it will also offer a “social bandwidth” component, which allows customers to share their data connections with complete strangers. Why would they want to do that? If you turn your Karma device into an open Wi-Fi hotspot, the MVNO awards you with 100 MB of free data for every user who hitches a ride on your connection. The users ‘borrowing’ your access get their own 100 MB to tinker with, and all that’s required to connect is a Facebook profile.

Other MVNOs like FreedomPop are exploring the use of social networks to build up their subscriber basses, but Karma is turning every customer into an evangelist for its service. Karma hasn’t announced a specific launch date, though co-founder Robert Gaal said it expected to go live within the next two months.

DFJ has never invested in the seed rounds of an MVNO before, but it does have a history of investing in social networking and media companies like Yammer, Technorati, Clipboard and TwitVid. It also participated in funding rounds for companies that challenge the traditional telecom business models, Skype, Ooma and Tango being two examples.

Update: An earlier version of this post incorrectly stated that DFJ has never invested in an MVNO before. While Karma is DFJ’s first MVNO seed investment, DFJ Growth invested in child-focused MVNO Kajeet in later rounds.

  1. Joshua Goldbard Monday, August 20, 2012

    I like everything about this except ClearWire.

    #1) It’s not clear that Clearwire will be around in a year, let alone 5.

    #2) WiMax<LTE.

    I think this is an awesome model, and I'm following this company like a hawk, but I feel as though financing eyeballs with the cost of data connections might be too much to bear. Time will tell.

    Share
    1. Kevin Fitchard Monday, August 20, 2012

      Hi Joshua,

      Clearwire is also pretty limiting in the sense that it only has a third of U.S. cities covered and currently has no plans to expand to more. I bet Karma is negotiations now with Sprint to use their LTE network. It’s what both FreedomPop and Ting have done: http://gigaom.com/mobile/mvno-freedompop-swaps-clearwires-wimax-for-sprints-lte/

      Share

Comments have been disabled for this post