Nikhil adds: Well, it looks like survival capital, and $12 million is significantly higher than their previous rounds of funding. The way this business works is that it has a problem of plenty. As we’ve explained before, the greater the increase in user base, the higher the cost for the company. We wonder how much their “advertising fill rate” (number of SMS’ with ads), and what kind of an advertising fill rate they’ll require to cover their costs.

Both SMS GupShup and MyToday are important businesses to watch in India – they’re both very large scale attempts at running direct to consumer businesses without telecom operator billing. What do you think – will direct to consumer businesses work in India?

Earlier: Push-SMS based mobile networking community SMS GupShup has closed a $12 million funding round led by Boston, USA based Globespan Capital Partners, which has backed the likes of Virtusa, Quattro Wireless and Linden Labs, the makers of the online virtual world for social networking Second Life.

Existing investors Charles River Ventures and Helion Venture Partners who invested $11 million in SMSGupshup in July 2008 have also participated in this round. The company has raised $37 million in funding so far – in the second round, the company had raised $7.5 million from Cambrian Fund, Lloyd George Asian Plus Fund and HTSG. The company is not yet profitable.

Funds To Go Into Expansion & Growing Enterprise Biz

SMSGupshup began in April 2007 and claims it now serves 26 million users. India adds 10-15 million mobile subscribers every month and, as of November 2009, had 506.4 million mobile connections. SMSGupshup has 2 million communities where users discuss religion, sports, and join fan clubs of celebrities.

The funding will be used to:

  • Expand to other geographies, which the company had mentioned in the last round too. It will begin with emerging markets that have high mobile adoption. We still believe that they might not be able to sustain their numbers in markets where the cost of SMS is higher than that in India so the company may have to choose between survival or expansion.
  • Fuel its enterprise business, which, as we had written about, should be given more thrust. It plans to roll out new features such as Mobile CRM solutions for small businesses and corporate brands. Currently, the company has “thousands” of SMEs who deploy GupShup’s mobile messaging solutions for their business needs.
  • Hiring: It is aggressively hiring globally and added 30 employees in the past two months. It is seeking to fill another 20 positions in marketing, engineering and advertising sales. The company has 130 employees in all.

Advertising Business, Board Of Directors

The company continues to depend on its advertising business, but has not shared the exact number of advertisers, vaguely calling putting it at “hundreds”. Some are insurance provider ICICI Lombard, Puma, Microsoft and Cadbury.

Venky Ganesan, Managing Director of Globespan Capital Partners, will join the company’s board. He also serves on the boards of Amobee, Nominum, oDesk, Palo Alto Networks, and Strongmail. Others on SMSGupshup’s board of directors include: Devdutt Yellurkar of Charles River Ventures, Ashish Gupta of Helion Venture Partners, Jeff Hussey, founder of F5 Networks, Inc., Rakesh Mathur, co-founder and chairman of the Board and Beerud Sheth the Chief Executive of Webaroo and co-founder of SMS GupShup.

In July it tied up with Facebook for SMS updates to power the long code 92FACEBOOK and claims it now accounts for 5% of all text messages sent in India.

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