Zipwhip, the Seattle-based company that enables existing landline phones to send and receive text messages, has raised $5 million in venture capital.
John Lauer, Zipwhip CEO, confirmed the round, which was reported today in a document filed with the Securities & Exchange Commission. To date, the company has raised 8 million in two rounds. The lead investor in both rounds was Ronin Capital of Chicago.
Lauer said the money will go towards hiring up to 100 salespeople, who will be responsible for signing up business customers to its platform.
Currently, Zipwhip employs 38 people, so its workforce could swell to as many as 138 by the end of the year. Most of the sales jobs will be located in the company’s Seattle headquarters, but it’s possible that it will open sales offices elsewhere, too.
Zipwhip was able to raise the money after a productive 2014. Last year, Lauer said Zipwhip enabled 200 million toll-free numbers and landlines in the U.S. to receive and send text messages for the first time. “That’s our entire reason for existence,” he said. “All of those numbers are now text enabled. You can now text-enable any landline or toll free number.”
But now that it’s technically possible for phone numbers to send and and receive messages, Lauer said the hard part will be getting those phone-number owners to become paying customers. Zipwhip charges $19.99 a month for unlimited text messages from a landline and $99 for enterprise accounts, which offer additional services and can be shared among multiple users.
Technically, Zipwhip falls into the super hot messaging category, which is receiving a ton of hype after Facebook purchased WhatsApp for $19 billion. But if that’s the case, then why did Zipwhip raise only $5 million?
“What we are up against is businesses having to adopt it into their workflow,” Lauer said. “But we are definitely seeing it work. It’s very likely we would raise future rounds as revenues grow.”
Lauer describes Zipwhip as the “Gmail of text messaging” because of its web-based portal, where customers can login to read and send texts. Current Zipwhip customers range from a taxi company that sends messages from its toll-free number to alert customers when a cab has arrived to car insurance agents, who prefer texting over email because people treat it with more urgency.
Ultimately, Lauer believes text messaging will win over proprietary messaging services, like WhatsApp, because he doesn’t see hair salons, dentists, radio stations and other companies adopting a closed system. “I think long-term SMS will win, and that WhatsApp will lose,” he said. “If you look at the U.S. market, WhatsApp has already lost — no one really uses it here. They use text messaging. There will be a lot of other messaging mediums, but text messaging is unique because it’s an open ecosystem.”