“We focus on collaboration, not integration.” – CSO Jason Lim
SEOUL, SOUTH KOREA ― Only three years after Yello Mobile’s first acquisition, the company has raised $78M, is nurturing an alliance of 35 startups, is profitable to the tune of $1.5M/month and plans to IPO next year. Last week I spoke with CSO Jason Lim to understand how Yello Mobile is quickly becoming Asia’s biggest mobile platform company.
What is Yello Mobile?
Yello Mobile, similar to IAC or WPP, is an umbrella company that acquires mobile startups. Their mission is to create a mobile platform company that services consumers across a wide range of industry verticals in the mobile space. Unlike IAC and WPP; however, Yello Mobile does not integrate companies into the umbrella company, but rather works to maintain the autonomy and independence of the founders and the company cultures they nurture. By guaranteeing independence it is expected that founders will remain with their startups long after acquisition, a core requirement for Yello Mobile’s sustainability.
“Our CEO sold his first company to Daum Communications in 2011. But working in Daum he lost his entrepreneurial way and became a ‘business man’. He did not want that to happen in Yello Mobile.”
Yello Mobile was launched with the vision that acquisitions could be made, while retaining the key elements of entrepreneurship that first inspired the startup founders. The company’s first investor was DSC. With their generous investment/cash injection, Yello Mobile was able to grow more rapidly, focusing on building alliance partnerships with top startups across a wide range of verticals including Mobile Media, Digital Marketing and Mobile Travel. According to the company, “We are hyper-focused on guaranteeing independence for our companies. We don’t integrate at all, but encourage strong collaboration between them. This facilitates rapid growth for the startups and for Yello Mobile. That’s how we can attract the best companies in each vertical.”
Acquisition Structure
Acquiring 35 companies in three years for a ‘startup’ is no easy feat. Jason explained that their acquisition structure is focused on stock swapping, rather than the outright purchase of company stock. Under this structure, founders are given a real stake in the future of the company, rather than a payout for their technology or team. This encourages founders to stay on-board for the long-term. This format also has obvious financial benefits, allowing Yello Mobile to focus spend on growth, rather than paying off founders. Ultimately, as startups in the alliance grow, their wealth is aligned with the wealth of the company, so they keep their motivation and entrepreneurial spirit and are motivated to continue to grow with their startups.
Benefits of Joining Yello Mobile
So far, Yello Mobile has been able to convince founders that the risks of staying out of the alliance are much greater than the risk of joining. Startups are acutely aware of the danger zone around three years after founding, where many startups run out of money or are unable to scale faster than the competition. This is the stage at which Yello Mobile offers the most value. They can provide financing, HR support, and extensive marketing and required support for regional growth. “Startups have a hard time to hire top developers, designers, and product managers. Our in-house staff really help with this. We help to solve that problem.”
In addition to an internal team of around 40 developers, designers and product managers, the benefits of creating synergies with other alliance companies is striking. For example one of their startups is particularly strong in the Chinese market, so they are also helping other alliance members to enter. These benefits allow startups to focus on growth. And it enables them to build much faster than if they were alone, which has resulted in intangible values. For instance, companies are able to share traffic, talent, and in some cases engage in cross-marketing. The biggest benefits though are sustainability and potential for growth. These benefits of joining the alliance, ultimately allow founders to concentrate on what they do best, which is to grow their business.
Incubator, Accelerator, Umbrella Company, VC Investor, Marketing Partner, And More
At several stages during our discussion it became clear that trying to compare Yello Mobile to existing organizations was futile. The company is breaking new ground in Asia and they are keen to avoid being pigeon-holed as a this or that type of company.
As well as running a VC fund, the company also makes angel investments in early stage companies. Yello Mobile is also not exclusive in its investment strategy, welcoming external VCs to participate in funding. They also operate as an incubator for later stage companies and as an accelerator for newly launched companies.
“We don’t advertise Yello Mobile, we just support our services.”
Yello Mobile is an umbrella company that doesn’t advertise itself as the service provider. Instead each brand remains its own distinct entity. This means that end users may not know they are using a Yello Mobile service. It also ensures that the entrepreneurs remain the focus of their companies, rather than a corporate entity.
Financials
So far Yello Mobile has raised a total of $76M from investors, banks, and other private investment funds. This includes their last round of funding earlier this year of $28.5M.
“Investors were very skeptical at the start, but after a while they were convinced by the numbers.”
How are startups selected?
Traditional VCs select startup teams based on the merits of the team, their ability to execute on the solution to a problem, and market potential. Yello Mobile does things a little differently, and if you are a startup team in Asia looking to join the alliance, take heed!
Yello Mobile first identifies a market with excellent potential. The next stage is to identify the top players in the market. Then they meet with the team, and aim to bring the top player into the alliance, or even the top three. For Yello Mobile some of the red flags that might put off a traditional VC, may not be such an issue. Hiring for example can be covered internally, and gaps in marketing or technical skills can be filled in easily. An example of this is their first acquisition in Indonesia. The company had no expertise in mobile development but had a strong web presence. Instead of having to hire a team in Indonesia, Yello Mobile’s team in Korea built out their mobile service, at no financial cost to the Indonesian team. That’s just one example of a benefit of being in the alliance.
How Do Entrepreneurs Exit?
As with a normal acquisition, Yello Mobile has a lock up structure for entrepreneurs meaning that for their equity to mature, founders (and all share holders) must remain in the company for 3-5 years. If they want to retire from the alliance and/or their company they can sell their stock back to Yello Mobile.
The Vision
Jason explained, “After IPO, we must focus on growth, growth, growth, growth, so founders don’t leave…In a sense we don’t have competition, because the leaders in every vertical we enter are part of the alliance.” This is an over-simplification of real market conditions, but illustrates the point that they aim to be the best, and to attract at least the top three players in each vertical.
“Yello Mobile is the biggest friend to SE Asian startups. We want to help them realize a huge vision and help them dominate the Asian market together. Please join us.”
Contributed by: Nathan Millard, Global Director for beSUCCESS
______________________________________________________________________
Nathan Millard, originally from the UK, is now a Seoul city transplant. As the Global Director for beSUCCESS (Korea’s top startup media and conference company) he dedicates his time to helping Korean startups connect with VCs, Angel Investors, Accelerators, media outlets, and any other resources that might be beneficial to companies as they launch locally and overseas.
Related Articles:
blognalda.wordpress.com 