Staying lean and forgoing fundraising are popular approaches to starting companies these days. In keeping with that philosophy, HipChat, a provider of instant messaging for small businesses, has opted to avoid Sand Hill Road and focus on getting to profitability.
The seven-month-old startup, however, did take some funds, as the recipient of a program started by blue-chip VC firm Founders Fund last year.
HipChat took in $100,000, thanks to the TechFellow Awards program. The program entrusts $25,000 to entrepreneurs and innovators in the high-tech industry to either invest in a new startup or a startup of their own. HipChat was the beneficiary of $25,000 from both Sandy Jen and Elaine Wherry, both co-founders of instant messaging company, Meebo, and TechFellow Awards recipients.
As part of the TechFellow program, Founders Fund also reserves the right to co-invest another $250,000 with their TechFellow recipients.
Founders Fund went ahead and co-invested $50,000, bringing the total amount invested in HipChat to $100,000. The structure is a convertible debt, meaning the angel investors and the Founders Fund can invest in HipChat’s Series A round at a discount.
What makes HipChat interesting? Besides its novel approach to receiving investment dollars, it's trying to make instant messaging a more secure environment for corporations. It doesn’t make sense that most corporations provide employees with a corporate email, and a public IM, such as AOL or Yahoo Instant messaging. These are consumer products with very little security and functionality that corporations need, said Pete Curley, co-founder, who came from Plaxo, through an acquisition of his former company, HipCal.
HipChat is targeting the small- to medium-sized businesses. “50 is our sweet spot,” said Pete, explaining that HipChat is far more affordable than the $150 per user, per month price points that Microsoft Communicator and Lotus Sametime charge.
And while there are relatively decent “free” versions offered by, say Skype, HipChat’s service at $1 per user, per month, seems relatively reasonable for startups that collaborate on IM. For instance, a person can share a document with everyone on an IM conference call. All parties can see the document vs. just one.