ViVotech gets a funding lifeline, now they have to redefine their business model

ViVotech gets a funding lifeline – it announced on Monday that it has secured a series C funding round worth $24 million dollars from old and new investors. The new investors include Motorola Solutions Venture Capital, SingTel and Innov8. Previous angels also invested more capital in the 10-year-old startup including Alloy Ventures, Citi Ventures, Draper Fisher, Jurveston, First Data, Motorola Mobility and Nokia Growth Partners. The company launched in 2001, is yet to make a profit and thus far has received $90 million in funding. However, with the acceleration of adoption and interest in NFC this year, ViVotech may be primed to come into its own. That interest, coupled with ViVotech being named one of the launch partners in the Google Wallet mobile wallet product, must have convinced investors that it was worth ensuring ViVotech gets a funding lifeline. Well that and for the protection of old investments, as no return comes from a dead company.

ViVotech has some big players rooting for them as they receive their funding lifeline

Speaking about ViVotech’s funding lifeline, Chu Swee-Yeok, CEO of EDBI said, “ViVOtech has emerged as the clear leader in this field, with its unique end-to-end NFC-based mobile commerce solutions that are successfully gaining traction with its customers globally. With our investment, ViVOtech will be able to leverage EDBI’s extensive industry networks and understanding of Asia to capitalize on opportunities created by the vibrant mobile commerce industry in the Asia Pacific region. We also look forward to the setting up of ViVOtech’s Global Centre of Excellence in Singapore to commercialize innovative mobile commerce applications for the international markets.”

“With NFC set to revolutionize the mobile commerce market, it is important for us to partner with ViVOtech, one of the pioneers in this space, as they expand their global presence,” said Yvonne Kwek, CEO of SingTel Innov8, in regards to the funding lifeline it had been part of providing to ViVotech.

ViVotech is a Near Field Communications company that provides NFC software and systems that enable rich mobile commerce solutions for in-store payments, loyalty programs, marketing and merchandising. In fact, they are more than that – they pioneered the concept of contactless payments in the early years of the technology and are in part responsible for the emerging industry we now all see. Even Verifone developed its own system after using ViVotech and then dumping them, and to that extent ViVotech has been a victim of its own vision in the early days when the world was yet to realize what NFC could do for financial transactions. ViVotech today provides the building blocks of the NFC ecosystem offering smart applications for enhancing the customer experience. They provide trusted service manager (TSM) software and point of sale systems all wrapped up with NFC capabilities.

ViVotech gets a funding lifeline but faces fierce competition

ViVotech gets a funding lifeline, is the headline but it perhaps should read “Is ViVotech Vs Verifone, like David and Goliath?” Verifone owns 50% of the market and as a company are hostile towards any organization that even looks to their market share. They have built their position over long, hard years and are not about to let anyone walk in and take what they see as theirs. We can see that just by looking at how aggressively Verifone reacted to Jack Dorsey’s Square product. However, Verifone needs to understand that the market is fragmenting with the new technologies that are being offered and seeing that ViVotech gets a funding lifeline should show Verifone that an old foe could potentially be back in the game.

Verifone isn’t the only competitor for ViVotech. In order to carve out a chunk of this new emerging space that is fragmenting to allow for more niche service and equipment providers, ViVotech needs to be prepared to also go head-to-head with Ingenico. Even though Hypercom looks as it if it will be swallowed up by Verifone for the bargain price of $480 million, ViVotech still has the opportunity to bid on Hypercom’s U.S. terminal business which would give it an instant footprint beyond what it has achieved alone.

ViVotech gets a funding lifeline but will it be ready for an initial public offering within 12 – 18 months?

When you are a ten-year-old company who has never turned a profit and you are dealing with a competitor that can buy out a major competitor for $480 million, you had better be able to concisely and succinctly communicate your new value added differential and to be able to rebrand yourself as more than just a hardware player. The challenge that ViVotech now faces is to do just that and it will have to use its funding lifeline tactically to compete. They have been pioneers in the past, and with the recent shifts in technology and buzz surrounding their specialty, which is NFC, we expect them to regain share in the marketplace over the next year or so.

“ViVOtech has worked long and hard over the last 10 years to establish ourselves as a leading enabler of in-store mobile commerce,” said ViVOtech CEO, Michael Mullagh, speaking about the $24 million funding lifeline. “The market is on the verge of rapid growth and we are gratified by the support and validation of our stellar group of strategic and financial investors. We particularly welcome our new investors from Singapore, EDBI and SingTel Innov8, and Motorola Solutions. In and of themselves our investors represent a mini NFC ecosystem. By collaborating with them and our partners and customers, we will stay on the leading edge of innovation and the development of merchant and consumer friendly applications.”

If Eric Schmidt is correct on his projections, 2.2 million NFC POS terminals will need to come online within the next year. Our question is how many of the 182,758 units that need to ship each month will ViVotech win? To date ViVotech has shipped 800,000 contacless payment readers for POS terminals. Will ViVotech be ready for IPO in 12 – 18 months? Only time will tell, but what is clear is that with its $24 million funding lifeline others have confidence that ViVotech can do it and they have won a second bite of the cherry.