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The future of mobile service plans?

October 30, 2012: 3:00 AM ET

Charlie Giancarlo

A startup hopes to disrupt the mobile services market.

FORTUNE -- Mobile services startup ItsOn today announced that it has raised $15.5 million in Series B funding, from backers like Andreessen Horowitz and SV Angel. So we took some time to discuss the company with co-founder Charlie Giancarlo, the former chief development officer for Cisco who currently is a managing director and head of value creation for private equity firm Silver Lake Partners.

What follows is an edited transcript of our conversation:

FORTUNE: What was the original concept for ItsOn?

GIANCARLO: The original idea stems from, in a sense, our past understanding of the telecommunications environment and what a huge change smartphones are. It's not just the evolution from teletypes tied to the ends of wires to PCs to phones people carry in their pockets. It's how the entire structure of the mobile network represents a migration from the core to the edge.

The second foundation was that we could use that change to give consumers more power over how their services are structured. Rather than saying it's all you can eat, or so many megabytes per month, how consumers or the businesses paying their bills can really tailor services for themselves.

Practically, what does that mean?

There is a lot of pain involved with getting a new smartphone. You go into the store and, even if it's well-run, you're there for an hour and a half. You select the phone, activate the phone, migrate your old phone number and contacts over and then set up services.

In our case, you select the phone on the web, and first we'll be on Android. It's sent to you and, once you punch in the purchase code, the phone is immediately running. You then can select your plan to fit your usage. For example, maybe a light user only wants email and Facebook (FB). Or maybe you want everything except for video. So you just pick and choose what you want…

And you can change the plan as you move forward, because we don't tie you to something for years. For example, say you want to use Twitter but your plan didn't allow for Twitter. You just change it, for example, to all you can eat Twitter for a dollar a month. We'll also suggest ways for users to save money.

The company is now four years old. What have you learned over that time?

What we've really learned is that attempting to do this solely by working through the carriers themselves is a slow path. Carriers are cautious and conservative and will only move in a step-by-step fashion. So what we decided, and what we're doing with our B round, is to take it directly to consumers by delivering a set of services they can buy directly and react to. We're fortunate that, given our tech, we can do it both through the carriers and also on top of the carrier services.

You mentioned that first you'll be on Android. Why? And what are you iPhone plans?

It's because Android is open source, so we were able to get access and create drivers without great interaction or permission from any authorities. In terms of Apple (AAPL), this isn't an app on top of the OS. So we need to be inside and, well, we'll see. Apple will do what's in its best interest.

Can you survive, long term, without being on Apple devices?

Yes. Android devices are very popular and should another OS – Windows or Blackberry or something else – come about, we'll try to work with it. We're also very open to working with Apple, and should point out that this isn't a case where we've tried and they said no. If we're successful with Android, we hope that will help us going forward with Apple and others.

Is this only for new devices?

Yes, for now. It may be possible to retrofit in the future, but it requires a re-imaging of the entire phone. Luckily for us, people tend to upgrade phones every two years.

Prior to this round, Best Buy was among the company's investors. Aren't you disintermediating them?

Best Buy (BBY) is interested because they can also sell devices that go onto the same plans…

So does that mean that people purchasing new devices at Best Buy will now be given the option of an ItsOn plan?

Not at this time.

What are your thoughts about a future Series C round?

It depends a lot on how this B round goes and how quickly we can attract customers. If things go close to plan, then we'd probably be looking at a Series C round in nine to twelve months.

You're a full-time managing director with Silver Lake Partners. Does your involvement with ItsOn affect that?

No. I helped start the company, and have done that a couple of times now over the past five years. Greg has been a close friend and we got together pretty early on to brainstorm ideas. I helped fund them and served on the board as an advisor, but all under the umbrella of part-time. Lots of weekends, evenings, etc.

So you helped fund them, as did one of your Silver Lake colleagues, Jim Davidson. Is Silver Lake giving any thoughts to raising a venture capital fund?

No. We do have a fund called Waterman that provides debt financings to mature, pre-IPO tech companies. We feel it's very good because it's not competitive with the venture guys, and actually helps them out. There's a lot of money already in VC, and we pride ourselves on being quite close to that community without being competitive with them.

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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