InMobi founder and CEO Naveen Tewari. Analysts say the company’s decision to venture into the mobile advertising space at a time when other start-ups were busy queuing up to tap the e-commerce boom has paid off. Photo: Hemant Mishra/Mint

Bangalore: For a company that started off in a cramped single-bedroom flat with 10 employees in Mumbai in 2007, mobile advertising firm InMobi’s rise has been meteoric, to say the least.

The company today operates from a swank technology park in Bangalore, occupying three floors, has 900 employees in India and overseas and is expanding across countries and continents to tap the vastly lucrative mobile advertising market. The near-term goal is to become India’s next billion-dollar corporate success. It counts 1,000 large enterprises as customers, including the likes of Unilever Plc. and Samsung Electronics Co. Ltd.

In 2011, Japanese mobile phone firm SoftBank Corp. recognized InMobi’s potential and infused $200 million into the firm, which builds software platforms and products for the mobile ad industry. InMobi has used a part of the money to finance acquisitions, the most recent being MMTG Labs, a San Francisco-based start-up that operates an app marketplace for Facebook pages, in July 2012.

Experts tracking InMobi say the company’s decision to venture into the mobile advertising space at a time when other start-ups were busy queuing up to tap the e-commerce boom has paid off.

For InMobi, which now has operations in the US, the UK, China and Australia, the timing of its decision to switch to mobile advertising from being a text messaging-based search platform could not have been better. Last year, technology researcher Gartner Inc. forecast that worldwide mobile ad revenue will touch $11.4 billion by the end of the year, up from $9.6 billion in 2012.

Gartner, which has not issued a forecast for 2014 yet, also said global mobile advertising revenue would grow fivefold between 2011 and 2016.

“Our decision to change our business model to advertising on mobile during the early days proved to be a very significant turning point for us,” said Naveen Tewari, the 35-year-old founder of InMobi. “That large change proved to be extremely pivotal in the company’s journey.”

The funding from SoftBank proved to be the second big turning point, said Tewari.

“Financing is obviously one very vindicating and significant milestone, so the $200 million we raised from SoftBank really helped us get into the next zone of our journey,” said Tewari, an Indian Institute of Technology-Kanpur graduate who has an MBA from Harvard Business School.

While India’s largest e-commerce firm Flipkart has dominated the headlines in the Indian media over the past five years as it grew at a rapid pace, InMobi, during the same period, has managed to quietly rack up consistent growth and is now aiming to touch its near-term $1 billion annual revenue goal.

Also, unlike Flipkart, InMobi has expanded not just in India, but countries across the globe. And it has done so by burning far lesser investor cash than Flipkart. While Flipkart has already done at least three major rounds of fund-raising amounting to at least $560 million, InMobi has raised less than $250 million in the same period.

According to a recent report by TechCrunch, a news website about information technology (IT) companies, about 691 million people globally use InMobi’s network.

“An important aspect of our journey was how we wanted to be a global company from the very start,” said Tewari, who started his career withMcKinsey and Co., followed by a stint at venture capital (VC) firm Charles River Ventures. “For a company to be successful, it’s not just about ideas. It’s also about luck. And everything else coming together.”

During his stint in the VC business, Tewari gradually started to feel the need to do something his own.

“I realized that if I had to work with others, I had to align with their vision,” says Tewari. “And since a large component of success depends on luck, I figured I might as well try it myself.”

Tewari now works closely with venture capitalists based in India to assist them in identifying future potential success stories in the software start-up ecosystem. “I work with VCs closely now—not from an InMobi perspective, but to assist them given that investing in a products industry is widely different from investing in the services industry,” he said.

Early beginnings and hurdles

The going was not always smooth. After it launched in 2007, InMobi found it tough to attract investors at home—a stark contrast to the present, when investors are unanimously tipping the company to pave the way for the development of software products out of India.

“I think the biggest challenge that we faced during our early days was telling the world that we could build great (software) products out of India,” says the 35-year-old Tewari. “As an Indian company to go outside India and motivate people, have them align to our vision and get them excited about what an Indian company can do was a hard thing to pull off. We were attempting to do something that hadn’t been attempted before. And that had its own set of challenges.”

The lukewarm response did not deter Tewari and his co-founders, who pooled all their resources to get the start-up off the ground.

After facing hurdles in attracting investor and customer attention during the first four months, InMobi finally got a helping hand and raised $500,000 from Mumbai Angels, an investor group. The funding from Mumbai Angels helped Tewari and his three co-founders set up an office and take off on their journey.

“One of the challenges of having exceptionally high quality talent is that they’re constantly restless, and they’re constantly on the lookout for opportunities. We’ve seen in the last 12-24 months that we’ve lost the most number of people to entrepreneurship—the reason why they might have left is because they might have felt the need to move onto to a different challenge and wanted to continue to do more,” he said.

Eye on the future

InMobi has a multi-billion-dollar market opportunity to tap. The question remains whether it can grab that opportunity and power its next phase of growth.

The mobile advertising market in the US was forecast to touch $7.7 billion in 2013 and expected to grow at a compound annual growth rate of 27% over the next five years, according to Forrester Research.

“As the installed base of smartphones and tablets increases and as consumers spend more time on these devices, marketers will increase their ad spend to reach consumers on these devices. Mobile ad revenues will start to cannibalize desktop and laptop ad revenues. Tablets are cannibalizing both desktop and laptop sales and reducing the time that desktop/laptop users spend on those devices,” said Jitender Miglani, an analyst at Forrester.

Several investors, venture capitalists and heads of accelerator programmes who were interviewed for this story were unanimous that InMobi has the potential to capture the imagination of investors and become a poster child for the country’s fledgling software products sector.

“There comes a time when a company does not win because it has a better product, but because it can build an ecosystem around its products,” saysSharad Sharma, co-founder and governing council member of software products think tank iSpirt. “So for InMobi, which has a very strong product franchise, the impending challenge would be to turn this into an ecosystem play. So whether InMobi can pivot itself into the next orbit will be determined by whether or not they can turn from being a product franchise into an ecosystem.”

The firm is also expected to sell shares in an initial public offering (IPO) over the next two years, although CEO Tewari said an IPO was not on its immediate agenda.

InMobi’s future course will be closely tracked at a time when India’s $108-billion IT industry is heavily weighted towards the services sector and is searching for its first billion dollar success from the software products sector, which currently contributes barely $2 billion in annual revenue. The concerns over the future of the country’s software products industry even prompted 30 homegrown product firms and product industry veterans, including the likes of Sharma, to come together and form the Indian Software Products Industry Round Table, or iSpirt, to represent the sector.

“You see a lot more entrepreneurs starting product companies now than you did five years ago,” says Tewari, who is also a member of iSpirt. “And you’ll see more and more of that, going forward.”

“With the emergence of e-commerce and mobile, a bunch of technology companies have already come up and will keep coming up which will develop products, and not focus on services.” Tewari said.

“I would clearly say that the next mega success from India’s tech industry will come from the products side.”

Read the original article here!