When Republican presidential candidate Ron Paul decided to organize a virtual town hall meeting last week, his campaign did it with video streaming technology from a Santa Monica startup called Vokle Inc.
The Paul campaign was the latest in a string of Vokle success stories that have made the company a darling among small tech investors. This month, the company announced a total investment of $1.26 million by Tech Coast Angels, the largest network of individual investors in the United States.
Vokle’s technology couples two hot Internet trends: social media and video advertising.
Chief Executive Robert Kiraz explained that while Skype is the dominant Internet video service for one-to-one communications – what he called a video telephone – and services such as GoToMeeting provide a virtual boardroom, his company handles large gatherings online in a format that he called a virtual auditorium.
“There are lots of video streaming technologies but we’re different because we turn video into a social networking medium,” Kiraz said.
The Vokle technology works much like a talk radio show. After opening an account with Vokle and publicizing an online event, the host – Paul, for example – sits in front of a computer equipped with a camera and microphone and speaks to his online audience. Viewers submit text questions, and a Paul staffer screens them. The staff worker selects a questioner, gets him or her on the screen and then everyone who’s logged in to the event sees the person asking the question and Paul in a split-screen format.
The conversation between the two continues until the staff worker breaks it off and moves on to the next questioner or returns to Paul speaking solo. It’s also possible to present two audience members in a discussion.
The main users of Vokle are bloggers who conduct virtual talk shows with their audiences. However, the company has attracted some Internet luminaries who have used it for online presentations including singer Imogen Heap, political commentator Arianna Huffington, former Vice President Al Gore and motivational speaker Tony Robbins.
Raymond Chan, the first member of the Tech Coast Angels to put money into Vokle, said big names got his attention and convinced him to try the technology.
“They were attractive to the Tech Coast Angels because of the attention from Tony Robbins and Arianna Huffington,” Chan said. “I followed the company for a few months and then we used Vokle for a Tech Coast Angels virtual pitch meeting. That put the concept of the company right in front of the investors.”
Chan and about 10 other angels soon put $200,000 into Vokle. Subsequent rounds brought the number of angel investors up to 40. The most recent round of funding will expand the company’s staff, currently six full-time employees, and bankroll marketing campaigns to grow the user base.
Commercial breaks
Angel funding has been Vokle’s main source of income. The service is free; the company makes money from video advertisements that appear during commercial breaks in presentations.
Kiraz said that based on growth projections, advertising sales will get the company to breakeven by the end of 2012. In the last quarter, Vokle’s registered members have grown more than tenfold to 760,000. It now delivers more than 1 million page views per month for advertisers.
Eventually, Vokle plans to add a fee for large-scale users. A paid account will have access to more video features, the option to remove commercial breaks and allow a broadcaster to insert its own commercials.
“Our long-term goal is become the de facto video communication standard for everyone who wants to reach an interactive audience, from a kid who decides to teach a virtual math class to a celebrity who has a virtual press conference with the world,” Kiraz said.
Andrea Belz, a former angel investor and president of Belz Commercialization Consulting Group in Pasadena, said Vokle could run into resistance from customers when it comes to switching its business model.
“It’s very hard to get people to pay for things they’re used to getting for free,” she said. “Very early on, companies need to decide on either an advertising or a subscription model. You have to provide a whole lot of value to justify subscriptions.”
Vokle is a good example of what angel investors are looking for in a company these days. Dave Berkus, lead investor at Tech Coast Angels, said angel investing took a dip with the recession of 2008-09, but has returned to full speed. Tech Coast Angels funds 10 to 20 companies each year plus second rounds.
In the last 12 months, three Tech Coast Angels companies have had successful exits, including initial public offerings for Trius Therapeutics in San Diego and Green Dot in Monrovia, and the sale of Language Weaver in Los Angeles.
“That’s a lot more activity than we’ve seen in a while,” Berkus said.
What angels want is a company that can achieve profitability without bringing in venture capitalists or large investment funds that would dilute the angels’ equity. With Vokle, growth projections show that’s possible.
Kiraz said he started trying to find money for Vokle at the depths of the 2008 financial meltdown and it wasn’t easy. But a chance meeting at a Tech Coast Angels mixer helped the company connect with investors.
“My advice is perseverance,” Kiraz said. “Give yourself enough time to find the right person. The economic tides will change, but you need to be in the game when that time comes.”
Berkus said Tech Coast Angels, which consists of about 280 members in five Southern California chapters, wants a prototype or product that investors can touch, feel or understand; an organized business plan and management team; and an explanation of barriers to entry that will keep competitors at bay.
Then they consider the human factor.
“Do we like the entrepreneur so well that we feel he’ll overcome any obstacles?” Berkus said. “Or do we like the technology so well we think it will win no matter what the entrepreneur does? It comes down to a question of whether we believe enough in either the jockey or the horse.”
