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The big business of Android 'jailbreaks'

September 18, 2013: 12:00 PM ET

Cyanogen raises $7 million to build the Red Hat of mobile devices.

130918112802-cyanogen-mod-620xaFORTUNE -- For the past six years, a former Samsung engineer named Steve Kondik has been working to improve the speed and functionality of Android phones, via an open-source "jailbreaking" project called CyanogenMod. Now he's turning the side project into a full-fledged business, with the help of some very high-profile investors.

Kondik today is announcing that his company, called Cyanogen, has raised $7 million in its first round of venture capital funding. Benchmark, which was an original investor in open-source pioneer Red Hat (RHT) in 1998, is leading the round. Also participating is Redpoint Ventures, which incubated Android long before the company was acquired by Google (GOOG) in 2005.

Cyanogen also will feature Boost Mobile co-founder Kirt McMaster as its CEO, with Kondik serving as chief technology officer.

"We brought in people who really understand open-source and Android and how to get product in front of consumers," Kondik explains.

That last part is extremely important, because Cyanogen already has a devoted following among hard-core Android fans. Its various versions have been downloaded millions of times, helping users to everything from extend battery life to strengthen data security. What the company needs to do now is appeal to the average Android user -- something it believes will be smoothed by a simplified installer that Cyanogen also is unveiling today.

"Our mass market plan is for the second half of 2014, which will include services and third-party integration," McMaster explains. "We'll begin to make money on services we can build and integrate in ways that Google or Apple (AAPL) don't necessarily do for their own business reasons. We're not beholden to any OEM or mobile operator."

In other words, Cyanogen will continue to offer its basic firmware packages for free, and then charge for various extras. It also plans to maintain ties to the open-source developer community, pledging not to charge for any of their contributions (instead integrating them into the basic package).

The $7 million should last Cyanogen for about two years, particularly since it won't need to hire an enterprise sales force. But it does expect to raise a Series B round much sooner than that, to continue scaling research and development.

Kondick also isn't concerned about blow-back from Google now that Cyanogen is going for-profit, despite several past scuffles. These are the users that Google likes," he says. "And we're not doing anything outside of their ecosystem that breaks any of their models... We also have a refresh for people who want to return to what they originally had."

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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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