How mobile video startup Vuclip grew to 120 million monthly users

“What’s your iPhone strategy?” That’s one of the questions Vuclip CEO Nickhil Jakatdar frequently got asked when he was trying to raise money for his company over the years. His answer was that the company, which focuses on emerging markets like India, Malaysia and Indonesia, didn’t need one — and that didn’t always go over well with potential investors. “It was hard,” recalled Jakatdar.

At times, he felt as if he could build either a great-looking app that would appeal to VCs, or a great user experience for consumers on low-end phones connected to slow mobile networks. “It was almost like, choose one or another,” he said.

Vuclip launched in 2008 with a focus on bringing videos to mobile phone users in India, and Jakatdar quickly realized that there was a discrepancy between the way people think about mobile media in the U.S. and the way consumers would actually use it in India and similar countries. “iOS(s aapl) is very small in most of those markets,” he told me, and Android (s GOOG) initially didn’t play a big role either. That’s why Vuclip decided to focus on a web-only mobile experience.

But Jakatdar didn’t want to just reach people on cheaper phones. His goal was to get users who had no mobile data plan at all and hardly ever accessed the internet. That meant that he couldn’t require people to sign in with their email address. A mandatory Facebook(s FB) sign-in was out of the picture as well, and credit card billing wasn’t even a remote possibility.

Instead, Vuclip pursued relationships with carriers like India’s Airtel, which is considered the second-largest mobile operator in the world. Vuclip tapped Airtel and about ten other regional carriers for billing relationships, which allowed the company to charge small micropayments for Bollywood clips and highlights of soccer games.

However, billing was only part of the equation for Jakatdar. He convinced Airtel that mobile video could be a gateway drug for mobile users who don’t have a data plan and wouldn’t know what a gigabyte gets them, or how fast 3G is. Airtel started to promote Vuclip as a way to view video on your phone, and then sold consumers data access per clip as opposed to per Megabyte or Gigabyte. The response was huge, causing Vuclip to add 26 million users in just eight months. Forty percent of these users had never used a data plan before.

Vuclip is now getting ready to repeat this success story in other markets, and just began a similar cooperation with an operator in Indonesia. Aside from Southeast Asia, Vuclip is already active in South America and the Middle East, and is getting ready to expand to Africa during its next quarter.

The company makes some money with advertising, but most of its revenue comes from its freemium model, which includes upselling users to access additional clips and increasingly longer content. About six months ago, Vuclip finally decided to release apps for Android and Java-based handsets that are capable of streaming full-length movies and sports games.

The company still doesn’t have an iPhone strategy, but it also still doesn’t feel like it needs one — and Jakatdar has some numbers to back up his stance. Vuclip now streams content to 120 million users every month, he said, and is getting close to being profitable.

And despite his difficulties telling his story to some VCs, Jakatdar was able to raise a total of $40 million over the years, with investors including NEA and the venture arm of Singapore’s mobile operator SingTel. In a way, the discrepancy between what some VCs expected from a mobile product and what users in emerging markets needed actually helped. “It attracted appropriate VCs,” Jakatdar told me.