On today’s episode of This Week in Startups, Jason Calacanis sits down with Stephen Stokols, CEO of FreedomPop. Stay tuned to find out why AT&T and Verizon should be terrified of these guys. They’re are offering 4G speeds for free up to 500MB, after that costs are less than 50% of the big guys. They are a game changer, stay tuned!
0:30 Today on the program we have the CEO of FreedomPop to talk about how they are disrupting mobile
4:45 We’re doing another TWiST Live at RocketSpace with Dave McClure on February 8
7:30 Let’s thank our friends at Igloo for sponsoring the program. Save 10% by going to igloosoftware.com/thisweekin and enter to get a chance to win on iPad mini
9:40 What does it cost someone to use an iPhone over two years
10:00 Explain to me why it is that carriers can get away with this crazy pricing?
11:00 What are Verizon’s or ATT’s margins on data?
11:55 How are you disrupting?
12:15 How do I get ½ a gig free each month?
13:00 How much does the device cost?
13:55 How much do you cost in comparison to the big guys?
14:10 What network are you actually on?
14:45 Are these networks going to be comparative to ATT or Verizon?
15:30 So you could use an old iPhone and only pay $20 per month?
16:10 Does this terrify ATT and Verizon?
16:30 Are these guys going to try and kill you? Have they already started to try?
16:50 What kind of margin does FreedomPop have?
17:15 Do you think you can scale this because you won’t have customer acquisition costs?
18:00 Is it possible that you could make enough money through another method other than people paying you in cash?
19:30 What is your background? Where did you come up with this crazy idea?
21:45 Let’s thank our good friends at Citrix ShareFile. Visit sharefile, click on the microphone and enter TWiST for a free 30 Day Trial
27:00 Explain WiMax versus 4G?
28:30 What about the latency issue?
30:20 How does it connect to the iPod?
31:45 Have you been sued yet?
32:00 Approximately how many devices do you have in the market?
32:20 How much funding have you raised thus far?
33:25 How long have you been around?
33:45 What has the reaction been from users?
34:45 Tell me about your Clearwire partnership?
38:55 Why hasn’t WiFi taken off yet?
39:50 How do you get FreedomPop to explode?
40:45 What are wholesale prices like?
42:15 So you think you could have you own devices with your connectivity embedded in it?
42:45 Will it ever be to the point where internet will be available everywhere?
43:00 Why hasn’t Google given you $50M?
45:10 What are your conversion rates like?
46:15 Will you sell? What is success for you?
47:30 Will the hardware ever be so cheap you could give it away for free?
48:50 When did you know that this was going to work?
50:00 Do you have users abusing the system by purchasing 3 different units?
51:25 Pre-launch, how confident were you this was going to work?
52:00 What about internationally, could it be a possibility in China?
52:50 Why hasn’t the shared WiFi taken off?
53:15 Explain what Fon is to the audience?
55:40 What about cars?
56:00 What is the problem with internet and cars?
57:00 What is your upcoming investment strategy?
63:20 So are you guys sold out of product right now?
64:00 When is the FCC approving the iPhone case?
69:15 Stephen I wish you a ton of luck with FreedomPop, I’m betting this is a billion dollar co. in 3 years!
64:45 Thanks to Citrix ShareFile and Igloo Software, we’ll see you next time in TWiST
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Today’s episode of ThisWeekIn Startups, is brought to you, by ShareFile from Citrix. Secure File Transfer, Built For Business. Visit Sharefile.com, click the microphone and enter TWIST for a free 30 day trial.
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Jason: Hey, everybody. Hey, everybody. It’s Jason Calacanis. Today on the program, I have the CEO of FreedomPop. They’re making those really cool iPod Touch and iPhone covers that get you 3G, 4G, unlimited data, pay as you go data. It’s going to disrupt, disrupt the mobile industry. FreedomPop on today’s ThisWeekIn Startups. We’re going to talk about mobile.
TWiST title sequence.
Jason: Hello, everybody. Hello, everybody. It’s 2013. This is ThisWeekIn Startups. The show that is absolutely crushing it. God, we’re having a great start of the year. Today is going to be an amazing program. We’re leveling up. Leveling up. We’re taking it to the next level. We’re getting better and better and better guests. A big part of it is the audience. The audience is suggesting great guests. They’re putting pressure on the guests. Texting them, tweeting them, e-mailing them. You meet somebody at a conference and you want them on the program, you say, “How come you haven’t been on ThisWeekIn Startups? Why haven’t you been on ThisWeekIn Startups? Just assume that they know what ThisWeekIn Startups is, cause they probably don’t. They might. Who knows? Anyway. I was just at CES. Boy, was it wonderful to meet all you folks. Don’t be that weird guy who just looks at me two urinals away, out of the corner of your eye. I know you’re looking at me. That’s weird. When we’re washing our hands, just say, “Hey, I love the show.” Just say, “Sacca was great.” Just blurt it out. Blurt out who your favorite guest was. Be brave. Come up and say, “Hi.” I’m a normal guy. Don’t be that weird guy, who was looking at me out of the corner of the eye in the restaurant, then comes up after dinner and like whatever… emails me, “I saw you at this thing.” Just come up and say, “Hi.” Let’s talk about the show, where it’s going, who your favorite guest was. Boy, was it great to have the second live episode. Phil Libin, from Evernote, he brought it. What an amazing, amazing event at RocketSpace. The first event, we had Jeff Clavier, the french dude, the angel investor extraordinaire. Boy, has he made a lot of money. He’s very successful. He was a great first guest. A hundred people came out for that. Then we built on that momentum and like 150, 175 people came. There were as many people standing as sitting. It was great to see my audience, my people. You guys had such great questions. I have the smartest audience in the business. That’s what I like to tell people: This is the number one podcast, show about startups. It’s also the only one. So, I’m one of one but I’ll take it. I’ll take first place anyway I can get it. Boy, am I excited. Let me tell you something. I am recharged in 2013. No more audio problems. No more technical problems. Thank you, Brandice. Booking awesome guests. Thank you, Kirin. Selling the hell out of the show, six weeks in advance. Thank you, Demant. Man, I got an amazing team. Man, are we crushing it. I am so happy right now. You can hear it in my voice. I like success and so do you. You want to be a great entrepreneur… or you probably are a great entrepreneur, maybe you’re somewhere in between. This is the show for you. This is where we talk about how to build companies, how to innovate, how to disrupt, how to build something awesome in the world. Today is going to be no different. We have Steven Stokols? Did I get it right?
Stephen: You got it.
Jason: Oh. I love it. God, I’m so dyslexic. Steven Stokols is on the program. He is the founder… co-founder or founder?
Jason: I always got to get that right. Man, there’s some co-founder watching the program going, “How come I’m not on the show?” Take it easy. We have one guest per show. You’re also the CEO, so that means you’ve got the top slot of FreedomPop. We’re going to hear all about it, in just a minute. Hey, show the hardware. just hold it up for a second. Give a little teaser here.
Stephen: We’ve got a couple. We’ve the iPod case here.
Jason: That’s the iPod case. Very nice.
Stephen: The case snaps on to an iPod and turns it into an iPhone.
Stephen: We’ve got the highly publicized iPhone sleeve. Which is…
Jason: Oh, boy. I love it.
Stephen: … due to come out, hopefully soon.
Jason: OK. That’s enough. That’s enough of a tease. Don’t give them anything else. OK. Since, I just spoke about the TWIST Live, ThisWeekIn Startups Live, we’re doing it again. We’re doing the third one at RocketSpace. Listen, RocketSpace, I got to keep you guys on your toes, apparently. Because, the food was great but there were none of those fancy San Pellegrino, Aranciato, Aranciata, Limonata drinks. You know what? My audience remembers. The first thing that somebody said to me was, “Hey. Is RocketSpace cheeping out?” The wine good. the beer was good. The food was good. But, they remember. You didn’t put those Aranciato sodas out. Keep.. every time, RocketSpace. Try to make it a little better each time, for my audience, please. You see we’re trying to make it better. We doubled the amount of people there. You’ve got to keep investing in great food. We’re going to do it again, on February 8th, in San Francisco. Man, am I so excited about this. Dave McClure has been on the program, before. But, he was over Skype or something like that. I can’t really vibe it when it’s over Skype. I need to have the person in the room. I need to look in their eyes. I need to hypnotize them. I need to use the neurolinguistic programming. Then, I can get the secrets out of them. You’ve seen me do it, before. I get people to talk about stuff that nobody else can get them to talk about. I get them to open up. I’m going to get Dave McClure to open up about his massive success with 500 Startups. He’s one of the most influential investors out there. Boy, I can tell you, he’s a really smart guy. I’m going to really enjoy that conversation myself, personally. I know you will too. You can get your ticket at twistlive3.eventbrite.com. Once again, it’s very expensive to come to this. I’m really trying to make as much money as I can, off of my loyal, loyal fans. As you can see, right there, I’m zeroing in on the price. It’s going to cost you $2. So it’s going to be a 3 hour event. It’s going to cost you about 75¢, an hour. Which is about a penny, a minute. So, it’s very expensive. You’re going to need to give me that $2. No. The reason we do that is, if people pay their $2 and have to put their credit card information in, it keeps people from buying a whole bunch of tickets and we know if any D-bags are coming. We can, sort of, filter out people. But anyway. I don’t tweet about this anymore, because so many people want to come. There’s not enough tickets. I want the super fans to come. So, I only talk about it on the air. Go to twistlive3.eventbrite.com and get your $2 ticket. That’s my little thank you and the team’s little thank you, for being a super fan. You know people drove to the event, from hours away. People flew in from Texas, to the event. It’s a big thing. A lot of people come. There’s an hour of drinks, before. There’s an hour. Then, there’s an hour after. People go to like, Bird of a Feather, dinner afterwards. Thai food, whatever. This is going to be no exception. This is going to be a great one. OK. That’s one piece of house-keeping. Oh. Igloo. Let me thank our friends, at Igloo. These guys have been fantastic. Igloo is the intranet that you’ll actually like. Go checkout Igloosoftware.com and you will see their great software. We use it here. It’s built on social tools you already use. Like, file sharing, like shared calendars, blogs, wikis. But, it’s all in a secure business context. It’s a great way to share information. You can use it for extranets, to bring your partners in. Igloo is fully hosted and managed in the cloud, so you can focus on your work, not your IT budget. Here’s how we use it at ThisWeekIn. We keep track of all of our equipment here. See this. I was like, “Hey, Brandice. I’m spending all this money on equipment for my audience. Please, keep it all in one place, so I know what we have. When people come, they know where it’s at. Anyway, you can see, we have all this stuff here, outlined very nicely. Everybody’s there. I can see how many people have viewed it, how many people have commented on it. We keep all the files associated with it. We keep contact information, in here. We keep the calendar, in here. It’s a great way to keep the team up to date. Everybody check out igloosoftware.com/thisweekin to get a free 30 day trial and enter to win an iPad mini. Yes. They know that you want that iPad mini. So go there: igloosoftware.com/thisweekin. You can just click there and say, “I’m just here, for the iPad mini.” They’re smart. They get it. By the way, their stuff is totally designed to work well on an iPad or iPad mini, in this case. Thank you so much. If you want to be a super mensch and you want to really help the program, if you’re a super fan, go ahead and thank @igloosoftware on Twitter. Thank you @igloosoftware on behalf of the 100,000 people who download every episode of ThisWeekIn Startups and really enjoy these founder interviews and our news program. So lets talk about FreedomPop. You guys are trying to disrupt the onerous, obnoxious, over-bearing contracts that these bastards, at the big TelCos, try to force people to sign up for. Are you not?
Stephen: That is accurate. You called them bastards, not me. But, yes.
Jason: I think you did say the word bastard. I think you said, F’ing bastard. No. I said that. Listen. Everybody knows that these contracts are onerous. It’s unnecessarily onerous. What does it cost somebody, when they buy an iPhone under like a major carrier, over two years? Do you have any idea?
Stephen: I do. It’s north of $2,000 for your family.
Jason: $2,000 if some 15 year old kid wants to get an iPhone.
Stephen: That excludes a $200 break-up fee, if you want to get out early. $35 activation fees they’re adding on now. There’s all kinds of additional fees hidden in there as well.
Jason: So, explain to me… because, I don’t know the history of this… why is it that the carriers can get away with this absolutely ridiculous pricing and locking people in? When, in other aspects of our lives, we’re not locked in like this.
Stephen: That’s a good question. The reality is, in The U.S., you’ve got an oligopoly: AT&T and Verizon. Two big guys control the market. They’re almost in… I want to call it direct collusion, but it’s an indirect collusion. One adds an activation fee, two weeks later the other adds an activation fee. They match each others prices. You’ll see, for example, Verizon launches family plans, two months later AT&T launches family plans, same pricing. There’s almost this collusion going on between the two big players.
Jason: We don’t know that they’re on a golf course saying, “Let’s collude.” Or, if they’re just doing it because it’s so obvious that’s what they should do. If there’s a race between two people, there’s no incentive for one of them to cut the margins. It’s sort of like Coke and Pepsi. Nobody’s going to come out and say, “Let’s make 10¢ cans of soda.”
Stephen: Exactly. You have huge margins. Especially in The U.S., you have huge margins.
Jason: are their margins like. These companies, how much do they make?
Stephen: On data, for example, margins are massive. They’ve got… They put people in plans, by the way, deliberately, where there’s huge breakage. So they push people into a 5G plan, for example, knowing that the average usage on a smart phone is 1.5G. Big breakage. So the margins are…
Jason: That’s like 70% breakage.
Stephen: Yeah. Exactly. Huge breakage.
Jason: They have you buy 5G and know that you will only use 1.5G.
Stephen: They push people into… for example, 1G might be $30 and 5G might be $50. Well everyone is going to take the 5G for $50, because of the way they price it. They’re only using 1G or 1.5G for they’re heavier users.
Jason: They do that scientifically? They figure out metrically, exactly how to optimize how to screw us, the consumers.
Stephen: No question.
Jason: We have no choice.
Stephen: Yup. Exactly.
Jason: Until now. So you guys look at this and you say, “Opportunity?”
Stephen: We say, “Huge market. Massive margins. A couple of players owning it. Right for disruption.”
Jason: OK. So how are you disrupting it? Explain it to me.
Stephen: Basically, what we’re doing… The future’s in data, in 4G data.
Jason: Of course.
Stephen: We’ve got high-speed internet. We saying, “You know what? We’re taking the web proven freemium model… as Skype did with voice, DropBox did with storage, VistaPrint with office supplies even. It’s all over the place… and apply that to data. We’re giving away a half a gig of data free, every month. To anybody who wants it.
Stephen: Half a gig of data, free.
Jason: How do I get it?
Stephen: You basically go to FreedomPop.com.
Stephen: We’ve got multiple devices you can choose from.
Stephen: For example, if you want the basic device, we’ve got a hotspot for that fits in the palm of your hand. It’s literally, probably 3″ by 2″. A tiny little hotspot. That thing you can connect up to 8 devices, anywhere, and get free 4G. Whether it be your tablet, your iPad, your laptop, your phone, whatever you want.
Jason: Wow. So it’s like a Mi-fi? I would know it as a Mi-fi, from Verizon. Something similar to that?
Stephen: Yeah. It’s like that. Much smaller but yeah.
Jason: Yeah, I have it. I bought it. Do you buy that?
Stephen: You buy that.
Jason: How much does that cost?
Stephen: Actually on the Mi-fi we don’t require you to buy it. You can put down a deposit. Cause, we’re trying to remove friction. We’re saying, “We’ll give you the device. You gotta put down a deposit. We’re a startup, we can’t be funding people with $100 devices.”
Stephen: “Put down a deposit. It’s refundable. If you don’t like it, you’re done with the service, whatever the case may be. You get your deposit back.”
Jason: What does that cost?
Jason: So, it’s cheap. You can get 500mb for free?
Stephen: 500mb for free, for the rest of your life, per month.
Jason: That’s incredible. So if I was a traveller of some kid in college, I could get this. Just use it when I need to. 500mb. Check my email.
Stephen: No brainer for a traveller. You’re going to the airport…
Jason: That’s why I got it. I said screw it, $100, I’ll keep this as a back up. So here is the plan. Casual 2G Plan, $17.99 a month. 4G $28 a month. That, in relation to what the oligopoly… is that how you say it, oligopoly?
Stephen: Nailed it.
Jason: … is what? You’re half their price?
Stephen: Anywhere between 30% and 50% cheaper.
Jason: 30% and 50% cheaper. Wow.
Stephen: By the way, those guys price on a 2 year contract, with a $35 activation fee.
Jason: Yours is just…
Stephen: Ours is just month to month. You can sign up this month and cancel next month.
Jason: What network are you using? That’s the question I have. What network am I actually on? Is FreedomPop built this huge network? Are you part of this other person’s network? There’s some other company.
Stephen: Yeah. So we got a couple of wholesale partners.
Stephen: Clearwire is the one we’re in bed with, right now.
Stephen: We launched a couple of months ago, on Clearwire’s WiMax LT network. Then, we’re moving over to Sprint’s LT network. Sprint’s buying Clearwire. So it’s going to be one and the same, anyway.
Stephen: But, we’re going to be on Sprint’s nationwide LT network, by the end of the year.
Jason: So, they resale on their network, for a cheaper price and you buy it in bulk, is that the idea?
Stephen: That’s exactly the idea.
Jason: Now. When they put these networks together, are they going to be comparable to the Verizon and AT&T network?
Stephen: Yeah. Sprint, right now, with the SoftBank acquisition, which has gotten a lot of publicity. They’re basically in the process of building out a nationwide LT network that will rival any network: Verizon or AT&T’s network, nationwide. By the end of this year.
Jason: Wow. So, if I am some 12 year old kid, 15 year old kid, and I got mom or dad’s 4S or 4, when they got the 5. Mom and dad don’t want to pay for the plan and I don’t talk on the phone anyway, I use SnapChat, I use Voxer, I use all these things. That is the pattern isn’t it?
Jason: I could just buy this case and pay $20 a month and be done.
Stephen: You can pay nothing, if you don’t use that much data.
Jason: Right. Realistically, let’s say these kids are going to use 2G. They’re going to pay $18, a month. Use Skype, use voxer, use Snapshot, whatever it is. iMessage doesn’t require texting.
Stephen: I’ll tell you, we just did a deal, it’s not commercially live yet, but we did a deal with a local-based company called, textPlus. I don’t know if you’re familiar with them.
Jason: Sure. textPlus.
Stephen: Free texting and voice.
Jason: So, you can actually get a phone number to text to?
Stephen: We will actually… It’ll be called FreedomPlus powered by textPlus. We’re going to be giving all of our users the ability to make free phone calls and text messages via this app, as well.
Stephen: Or, you can use Skype or your favorite other VoIP app. We’ll offer that via textPlus.
Jason: This must terrify the AT&Ts and Verizons of the world, no?
Stephen: I think so. Actually, I know so.
Stephen: On one hand, they’re looking at us, oh wow, a new business model. There could be some opportunity. On the other hand, it could completely destroy the world they live in.
Jason: Oh, hell no. They’re looking at it that way. They’re not looking at it, you saying, “I’m going to cut 30% -50% of the margin out.” That means less bonuses for the guys up top. These guys are going to try to kill you. Are they not? Have they started?
Stephen: Let’s put it this way. They don’t like us. To your point.
Jason: Right. No. They detest you. I can tell that.
Stephen: But, at the same time, their alternative is to lower their prices and start cutting their own margins. Which is what we want them to, eventually do.
Stephen: But they’re not…
Jason: How much do you make after? If you could give away this $18 thing, what kind of market do you have? Do you have a decent enough margin so that this business keeps on going?
Stephen: Yeah. We actually approach it different. We’re coming at a perspective of, listen, if we could get 15% or 10% margins, that’s plenty for us. We’re coming into an industry where they are getting 7, 8, 10 times those margins. We’re not greedy. We just want 15% margins. Which are pretty thin margins, but pretty normal for a business.
Jason: You think you can scale that because you don’t have to do a bunch of customer support? You’re not going to have store infrastructure. You’re not going to do the big ad campaign on the Super Bowl. Is that the idea?
Stephen: A couple of things. 1. Our customer acquisition. Verizon pays anywhere between $175- $250 for a new customer.
Jason: With television ads?
Stephen: With ads, online, whatever it may be. Subsidized devices. Our customer acquisition right now is zero.
Stephen: It’s all word of mouth. It’s all organic. So, on one hand, we’re picking up users much cheaper than the big guys.
Jason: Got it.
Stephen: On the other hand, we’re set up like a web company. We call ourselves a WEBCO. Cause at the end of the day, if you looked at us on paper, we don’t own any networks. We don’t own anything. We outsource customer service. We’re a web company on paper. Very low cost base. Very low, sort of, fixed costs also. Everything is variable for us. We can scale in a variable way.
Jason: Let me ask you a question. Is it possible that you can make enough money, let’s say $1.50 a month, which is what $18 equals a year, if my math is correct, through some other method, other than cash?
Stephen: You’re two steps ahead, already. There’s two other… We have value added service, which is cash. For example, you could get a speed boost. Faster speeds for a few bucks a month and that kind of thing.
Stephen: We also have something… we want to allow people to earn more free. What we’ve done, we’ve partnered with many companies. 30 or 40 different offers. People can go in there, for example, and sign up for Netflix. We’ll give them a gig and a half free. We get paid. Or, people can add friends. The other thing is people can add friends. Each friend, you get 10mb free, per month, forever.
Jason: Oh. The DropBox model?
Stephen: The DropBox model, but it’s not a one time hit. You can do it forever.
Jason: DropBox is forever too. They give that… whatever you get. You get like 500mb…
Stephen: Yeah. Storage.
Jason: Yeah. Storage. Lifetime.
Stephen: The key difference with us is that you actually have this friend list and you can continue to share and request. So let’s say you and I are friends on FreedomPop. Your not going to use your 500mb free, this month.
Jason: Oh, no.
Stephen: You can give me some.
Jason: Oh, hell no. You can move it back and forth, like a commodity?
Stephen: You can move it. Correct.
Jason: Oh, that’s so genius. Who the hell are you to come up with this crazy idea? Is this your idea?
Stephen: It’s collective. It’s a team.
Jason: Yeah. What’s your background that you came up with this crazy ass, disruptive idea? Because this seems to me like one of these ideas that’s too hard to execute on. When did you come up with this idea?
Stephen: Background’s actually new. If you go back say, 7 or 8 years, I was actually in London, working for British TeleComm, a huge TelCo. My job there, I was in charge of all the innovation there. So anything that was not, sort of, fixed line or broadband, was under my domain.
Stephen: I was basically trying to disrupt the company I was working for.
Jason: Right. Oh, that must have won you a lot of friends.
Stephen: Eventually, I left and started my own company.
Jason: “Gee, thanks Stephen, you’re going to crush all of our bonuses. Oh, really. Compress the margins and we all get 2 less weeks of vacation a year. Fantastic.”
Stephen: Probably why it didn’t work out, long term there. I left BT to start my own… I’ve got a lot of TelCo experience. I was very what the threats could be, to a TelCo.
Jason: Right. Let’s just go back. Without revealing inside information or whatever. Is your perception, having been on the inside, that they are actively trying to stifle innovations like this?
Stephen: TelCos know… for example take I gave you. TelCos know that their most profitable users are the users who sign up for the 5G and don’t use very much.
Stephen: In a home game, they don’t like users like you and I, who probably are streaming a lot of video and NetFlix.
Stephen: Because, there’s no margin. They like the guy who’s like my mom or my dad, who uses 3, 4, 5, maybe 6G a month at home, but is paying for unlimited $50, a month. TelCos know what their sweet spots are. They basically try to push people into the 5G and incentivize the maximizer.
Jason: It’s like a waiter. You’re at this family-style place. You’re ordering and they’re like, “You’re really going to need a couple more dishes.” Then, you get to the end of the meal and you’re like, “We didn’t even touch the the Chicken Parm.” You’re like, “Why…?” The good waiter tells you, “You’ve ordered a little too much. You might want to go back one dish and see if you’re still hungry.” But, they’re like these waiter, “Oh, that’s not going to be enough. You’ve got to get the steak au poivre.” All of sudden, you’re sitting there with 5 more dishes than you had to order.
Stephen: Exactly. And, you’re paying the 15%, 20% on top of that to the waiter.
Jason: Right. And, you’re giving this great tip for giving you bad advice.
Jason: Alright. When we get back, I want to hear about… I’m going to do a little commercial, in a minute. I want to hear about, what it’s going to take for this to become a sustainable trend. How many people are using it now? Exactly if this is going to go from this crazy idea, to actually a mainstream phenomenon and how you’re going to do that. When we get back. I just want to tell everybody, my friends over at Citrix, they’ve been great friends of mine because they make a great product, GoTo Meeting, that I use literally. I just got off a GoTo Meeting. I use it everyday. I was doing a little PR. I like to use GoTo Meeting. Cause the PR person sets up the call. Now, we’re with a journalist. Sometimes I just want to riff and pull something up on my GoTo Meeting. I’m always on GoTo Meeting. Ten times a week. Citrix makes that wonderful product. They were like, “Hey, Jason. We have this new product. Can we show it to you?” I say, “What is it?” They say, “Oh, it’s ShareFile.” I said, “OK. What is that?” Immediately, I was like, “Wait a second. It’s just sharing files?” No. This is like industrial strength, super, uber powerful for sharing files. You can send files of any size, up to 10GB. Huge files. Access files from any computer or mobile device. It’s safe and secure. It’s built for business. This is the industrial strength file sharing system. We use it here, because you can request files. This is an incredibly, amazing feature. Instead of me waiting for someone to put something into a file sharing service, I can say to them, “I’m looking for this file.” Send them a note. a little private place to put the file. A secret URL where they can drag and drop the file in and give it to me. They don’t have to even sign up for an account. It’s a very innovative feature by ShareFile. I was really impressed by that. Then they also have this great feature where when we’re using it, I can see if people are accessing the file, downloading it, viewing it, sort of like an audit trail, if you will. It sends you these email alerts. “This person actually got your file.” “This person looked at the file.” This has been very important for me, with the Inside.com relaunch because I have been sending out proposals. I’ve been sending out pitch decks, if you will. I want to know who’s touching it and when. How often? It was really interesting. I sent a file out and saw, oh, it’s being opened by 3 or 4 different people at the same time. They must have forwarded it. This is industrial strength file sharing by Citrix. You can share large video clips. All this kind of great stuff. As always, they understand that I have a very astute audience. So they said, “Let’s get out to the ThisWeekIn Startups audience.” Because they know you guys are amplifiers. You’ll do things like thank @sharefile on your Twitter accounts. But, go ahead and go to sharefile.com. Click on the radio microphone button and use the promo code: TWIST. No credit card is required. That’s critical. How great is that? They know my audience. No credit card required. You can go try it. If you like it, I know you will, you will sign up. So go to sharefile.com and click on the radio microphone button and use the promo code: TWIST. It’s really interesting. I can see the audit trail. This is kind of interesting. I was like, “Let me see if I can see if anybody is opened this stuff.” This is the other thing that I liked. They have folder access that’s very granular. I can say, do I want people to be able to download/upload, delete stuff, be the ad administrator, on a very, very granular basis. Then they have this activity log, which was particularly cool. Who’s downloaded, who’s uploaded between these dates, etc… It’s very important, in a lot of different situations, that you’ll find yourself in business. You know the ones that I’m talking about. Where you want to know, who’s got the file, who’s looked at it and when. Really great product, by Citrix. You can trust those folks, because they make the great GoTo Meeting. Thanks again @citrix for making @sharefile. Everybody check it out. Go to sharefile.com and click on the radio microphone button and use the promo code: TWIST. I know you’re going to love it. Thanks so much for sponsoring independent media, like ThisWeekIn Startups. We couldn’t do it without you. Thanks to my friends @citrix. That was a pretty good ad.
Stephen: Not bad.
Jason: You like that ad read?
Stephen: It was pretty impressive.
Jason: Right about now you’re like, “If this motherF’er would do that for FreedomPop, that would be a pretty good ad, wouldn’t it? Weren’t you just thinking that?
Stephen: That’s the up sell, right there.
Jason: That’s it. That’s why I had you on the program. It’s all a ruse. No. I had you on the program because I bought every single item you make. You only have like $150 in items and I’d read about it. I was so… like, “I’m spending $300 or $400 across my devices. Cause, I have to own every device. You know. I just have to get all of these things. Now, explain to me how you get this… let’s look at this one thing. This is the one that’a not out yet, right?
Stephen: That’s the one that’s still under FCC approval.
Jason: OK. So this is FCC approval. This is just… it looks like… you know what this reminds me of? What’s the battery case for the iPhone 4?
Stephen: The battery charger.
Jason: The battery charger.
Stephen: Because it’s modeled after that. It is a battery charger, by the way, too.
Jason: Oh, it is?
Stephen: Yeah. It doubles as a battery charger.
Jason: Oh. So this will give me about a 50% more life on my phone or something.
Stephen: Double the life of the phone.
Jason: Oh. So I’m carrying that anyway.
Stephen: You might as well have 4G.
Jason: What is that called?
Stephen: There’s Mophie.
Jason: Mophie. I had the Mophie cases. They don’t have the Mophie cases for the 5 yet. I would always carry the Mophie case with my 4S. This looks like a Mophie case and in fact, you’re saying it is. It’s a battery. I will tell you, this makes your phone 50% heavier or something. But, if you drop it, your protected. You have to have a case anyway, so who cares? iPhone is too light. This is also 4G?
Jason: Which means LT. Is that right?
Stephen: In this case WiMax. But yeah.
Jason: WiMax. Explain to me the difference when they say 4G, LTE and WiMax. What’s the difference there?
Stephen: So 4G is, kind of, the faster speeds. Wi-Max is the… LTE is the future.
Jason: OK. That stands for Long Term Evolution.
Jason: Which means, where we need to go to. Or, is that just neurolinguistic programming that they’re just getting everybody to say it’s Long Term Evolution so…
Stephen: I think so.
Jason: People are so evil. So they named it like, Our Great Future. That’s what I’m going to start naming my… That’s my next product. Peace To All Nations is my next product. It’s soda but if you drink it, there will be peace to all nations. What a neurolinguistic manipulative nonsense.
Stephen: There you go. PT. We can come up with a nice acronym for them.
Jason: Exactly. Anyway. LTE is this Long Term Evolution. You’ll get speeds of what, on LTE?
Stephen: On LTE, assuming the networks are… the networks are unencumbered now. So you’ve got an iPhone 5…
Jason: I’m getting 20mb.
Stephen: Yeah. You get 20 down, but that’s not going to last.
Stephen: The more devices go on LTE, it’s going to come down somewhere between… I think Verizon is claiming 5-7. We’re in the same boat.
Jason: What can’t I do? With 500mb I can do anything. What can’t I do?
Stephen: That’s what you’re going to get DSL, at home basically.
Jason: What can’t you do? What is something I couldn’t do? What takes more than 500mb?
Stephen: That’a home DSL, right now.
Jason: You can do anything you want. Who cares? Your done. The latency is the issue, right? Is it 500mb but then there’s a latency issue?
Stephen: Devices have there… maybe older devices are going to be slower. The reality is if you’ve got an iPod or an iPhone, for example, and your getting 5-10 down… we’re getting anywhere between 8 and 10 on this thing when the signal is strong.
Jason: 8-10. Which means that could do video conferencing, no problem.
Stephen: You can Skype. You can Face Time on that thing, anywhere you’re at. This is an iPod. You can Face Time out on the road, wherever you want.
Jason: OK. Now give me that one. This is the one that’s disruptive. Because, I know, having talked to nephews and nieces and whatnot, that they’re all using… The iPod Touch is a front by Apple to have a cheap iPhone. Correct?
Jason: They don’t call it an iPhone. They claim they don’t want a $100 iPhone, but they sell how many tens of millions of these motherF’ers, per year?
Stephen: Actually, Steve Jobs, when it did come out, called it an iPhone…
Jason: For kids?
Stephen: … without the cellular.
Jason: Oh, he did say that?
Jason: He probably retracted that afterwards. The PR people must have spit out their coffee, when he said that.
Stephen: They carriers probably didn’t like that.
Jason: It is true. It’s the same goddamned device as the iPhone. It’s got everything the iPhone has. Is there anything it doesn’t have that the iPhone has? Aside from carrier connectivity.
Stephen: The only thing it doesn’t have is a voice network.
Jason: That’s it?
Stephen: That’s it.
Jason: That kids don’t use anyway.
Stephen: You don’t need it anyway.
Jason: And if they did, they could use any of these other things. This is super light because, that is so light. Is this also provide a longer battery life, or no?
Stephen: That does not. That is actually designed to feel like an iPhone 3. When you snap it on, it feels like an iPhone 3.
Jason: Let’s face it an iPod Touch is so much less heavy than an iPhone.
Jason: But, when you put it on here. Boom. Now, I have… How is it connecting? Is it Bluetooth?
Stephen: Actually it connects to the iPod via Wi-fi. So, what’s cool about that device is that it’s not just the… it just snaps on and it gives your iPod the cellular connection, wherever you’re at. It also allows you to connect up to 8 other devices. So, it’s a hotspot as well. So you got a bunch of kids on the bus, one kids go the case, which is what we’re getting.
Jason: Why is everyone not going ape sugar over this?
Stephen: It is. A lot of them are. we actually sold out. The bottom line is we couldn’t hit the holiday demand, because we didn’t have enough devices on demand.
Jason: Why would anybody, with their kid, buy them an iPhone, when you can buy this?
Stephen: You shouldn’t. Especially
Jason: 20 bucks a month.
Stephen: Free actually.
Jason: OK. Starting for free. Let’s be honest, kids are going to go crazy.
Jason: Let’s call it $18 for your kids. Worse case scenario, you’re kids go crazy and you’re spending $25 or something. These stupid parents are spending $100 a month, plus overage charges, I’m sure, to give their kids an iPhone.
Stephen: Right and they’re locked into a contract and everything that comes with that.
Jason: So, for 80% less you get all the functionality. Plus, it’s a hotspot. Because you guys are doing it, based on data, you don’t care that there’s 8 people on this, whereas these bastards…
Stephen: They’ll charge you $25 a month, to turn your phone into a hotspot.
Jason: They’re going to kill you. You realize that, right? You’re going to walk out of this place and… you’re going to wind up in a river, somewhere.
Stephen: You guys got bodyguards to protect me on my way out.
Jason: Seriously, though. AT&T… are they suing you. Have you been sued yet?
Stephen: We have not been sued yet.
Jason: They’re going to though. Do you expect that when you took money from investors. That they’re going to try to stop you, by any means necessary.
Stephen: That’s probably going to be the reaction. We’re hoping the reaction will be that they will lower their prices. At the end of the day, we want to bring it all down to check.
Jason: They’re not going to. Let’s talk about these. How many of these things are out on the market, approximately?
Stephen: This is where I can’t share specific numbers. The reason being, we’re in some funding discussions.
Stephen: We sold out of this device.
Jason: You guys raised a lot of money, already, though. How ouch did you guys raise, in the first round?
Stephen: We raised in total, just under $10M.
Jason: Just $10M?
Jason: That’s it?
Stephen: Series A.
Jason: Will you be able to launch this with just $10M?
Stephen: We’re set up like a web company. We’re very lean. We’re very, sort of… our cost base is variable.
Jason: Who’s the lead investor, in this?
Stephen: We’ve got three VCs invested. Atomic Niklas Zennström’s company. Again, this is very much a Skype for data. We’ve got DCM, Doll Capital, Sand Hill. We’ve got the company called Mangrove.
Stephen: You’re familiar with Mangrove. They were the first investors in Skype and they love to disrupt TelCo. So they were obviously intrigued with us.
Jason: Wow. So you raised 10 dimes. $10M.
Stephen: Just under total.
Jason: Just under $10M. How any people are at the company?
Stephen: The company’s got… we just added a few people this week. So, we’re about 35 people. Including some customer service.
Jason: Where are you based?
Stephen: Right here, in West L.A..
Jason: No doubt.
Stephen: I believe my co-founder’s kid goes to school with your kid.
Jason: Oh, really.
Stephen: I just got that tidbit on the way over.
Jason: Let’s not say on the air. I don’t want someone to try to meet me for meetings outside of my kid’s pre-school. Which could happen. How do you… Aside from the PR value, this has been around how long?
Stephen: We just launched a few months ago.
Jason: October, November?
Stephen: October. Yeah.
Jason: You’ve probably have sold tens of thousands of these.
Jason: What has the reaction been from the people who buy them?
Stephen: Here’s the cool thing. We actually have… I’ll share this with you. We have hundreds of thousands of users. It’s a beta for us. What we’re also trying to do is get the unit economics down. To your point around business viability.
Stephen: Make sure that’s all nailed, before we scale the hell out of it.
Stephen: We’ve basically had hundreds of thousands of inquiries. Where the coverage is strongest is where we’re letting people on. We’re very tight on the coverage net.
Jason: Ah. So if you’re not where you have great coverage by Clearwire was it?
Jason: So you’re basically trying to keep people from getting the impression that this will work everywhere, yet. Because, the Sprint deal isn’t closed.
Stephen: Correct. The Sprint deal’s closed. We’re in the process of going with Sprint. Clearwire’s in the top 80 markets, covers about 120M people.
Stephen: L.A. is fantastic. New York. All the big markets. We’re basically letting people on. We have limited devices for the beta. So we’re letting people on in the best networks. The reaction’s just been overwhelmingly positive. People love it. Because, it sounds too good to be true to a lot of people. The they get the device and…
Jason: That’s what you’re hearing from me hearing this talk is, how the hell is this possible? This Clearwire company seems fascinating. Tell me about that. It seems if they didn’t build their network… They’ve built a network, just to do wholesale?
Stephen: Clearwire’s got a retail division, as well.
Jason: What’s it called?
Jason: Oh. I’ve never even heard of it.
Stephen: They’re actually, as far as IP, they’re in the top 5.
Jason: What do they sell?
Stephen: They sell primarily home broadband.
Stephen: Which, we’re moving into, as well. You’ll be able to get a Clear, still wireless, back-haul 4G. I think their price is like $35 a month, for unlimited.
Jason: So, you can have wireless at home, in a place where you can’t get DSL?
Stephen: Correct. Or, where you can get it, it has fast, if not faster, than DSL.
Jason: Really? You get a router?
Stephen: Just a router. You just plug it in. There’s no trunk rolls or anything along those lines.
Stephen: They’re also… strategically, they’re focused on wholesale. Sprint is one of their biggest wholesale partners. That’s where the bulk of the real revenue comes from. These guys are a wholesale based company. They don’t look at retail like, “We want to protect the retail stream.” They look at it like, “We can care less about retail, we’re about building wholesale revenues. Here’s this innovative new business model.” They want to enable it.
Jason: Right. So, in a way, if they hadn’t built that network, there’s no way you could exist, because AT&T or Verizon would never let you do what you’re doing.
Stephen: I’ll tell you what. The reason… Are you familiar with a company called, LightSquared?
Jason: I do.
Stephen: They had problems with the…
Jason: Explain it to me. Explain it to the audience.
Stephen: LightSquared is a new 4G being built out by Falcone, the big investor. Then it got shut down by the FCC and a lot of political lobbyists. Probably funded by AT&T and Verizon, as well. He was building out this big network, about a year ago. Then it got shut down because of regulatory reasons. What he basically set the tone for, he was going to be wholesale only and try to enable innovation. He came along and though he got shut down, he sort of sent a warning shot to the industry. Clearwire basically said, we’re going to fill a void that LightSquared was going to try to fill.
Stephen: We’re going to focus on that. So, Clearwire, sort of, changed their path a bit. They, sort of, freed up from Sprint, a bit and started to reach out.
Jason: So, in a way, it’s inevitable that somebody will come in and offer a wholesale wireless data. Is there another one that’s going to come?
Stephen: The cool thing is Sprint. Which is the third… AT&T and Verizon, between the two of them is like, I think 85% market share.
Stephen: So, you have Sprint. Which has much less to lose on the retail side.
Jason: They’re the stray dog. They’re the wildcard.
Stephen: So, they’re far more committed to wholesale.
Jason: Masayoshi Son bought them.
Stephen: Exactly. He’s…
Jason: He’s a gangster. In the best sense of the word. I had lunch with him twice, when I was in Japan last time. He is a brilliant man. People don’t know, SoftBank brought the iPhone to Japan. When they said it would never work. Now it’s crushing it. He was the richest man in Asia, for a period of time.
Stephen: Still probably up there.
Jason: He’s still up there but, he’s also just a genius. You know when you vibe with someone… Have you ever et him?
Stephen: I haven’t met him in person.
Jason: There’s some people… When I sit with Cuban or Elon Musk and you start talking. It’s like Boom, Boom, Boom. Like riffing and talking about stuff. I spent 3 hours just talking at lunch. Talking with him with like 20 other executives in the room. They’re all sitting there, watching us talk. “Wow. What are those guys talking about?” We’re just going back and forth, back and forth, back and forth. Anyway. He’s a brilliant guy. He’s now said, “I’m going to buy Sprint.”
Jason: And he bought it.
Jason: He wants to what? Do what with it?
Stephen: He wants to actually… He’s got the same objective as us. Which is to dent this oligopoly. That’s why having Sprint as our wholesale partner. You’ve got Clearwire, then we’ve also did this deal with Sprint. We’ve actually got two networks now. We actually will have full broad coverage. You got SoftBank buying Sprint which is going to… that emboldens us even further.
Jason: You’ll have access to the Sprint network. Clearwire becomes Sprint, or their wholesale unit. Do you think there will be another… What was the company that got shut down by the FCC?
Jason: LightSquared. Do you think there’ll be more of these, like LightSquared, popping up? Or, is it just too expensive to build a network?
Stephen: The reality is LightSquared is still fighting their battle. Maybe they make it, maybe they don’t. But I think it’s too expensive. Networks are billions of dollars. So, at the end of the day, you’ll probably see… We are, by the way, talking to other carriers. You’ve got T-Mobile, obviously, is the other one.
Jason: T-Mobile is the other one who’s like a wildcard.
Jason: They’re up against it.
Stephen: Right. Even AT&T and Verizon wholesale divisions look at it. The reality is, because of the channel conflict, it’s never going to happen. But, they look at us and say, “We’d love to have that wholesale revenue coming through us.”
Jason: Why hasn’t wi-fi taken off in a big way? You see Boing Boing, which I have a Boing Boing account. That is a great company. They got 500,000 hotspots, or something like that. Are you able to buy into their network and offload some of amount of traffic to it?
Stephen: Yeah. So like Boingo, for example, L.A. based as well, theoretically, yes. The reality is when we look at, sort of, what we’re doing, you don’t need… When you go to LAX, you just pop this thing on, you’re getting free… you don’t need to sign for T-Mobile.
Jason: For Boingo.
Stephen: For whoever is in LAX. It’s not Boingo. But, the other… I forgot the name of the company that does LAX. You’ve got… you really don’t need it.
Stephen: You’re getting speeds, by the way, Starbucks for example, their speed’s only one and a half down. You’re getting like 4 or 5 times faster speeds.
Jason: Look at that. Should I take this call for you? No. Take that call. You’re vibrating here. So, it’s obviously working. That you’re going through FreedomPop. So how do you get something like this to explode and become a phenomenon, do you think?
Stephen: I think we’re on the path already.
Stephen: If you look at it…
Jason: The cost does it.
Stephen: Yeah. You’ve got a compelling product. By the way, one of the key things we looked from the gate. We had to have a compelling proposition. So, the whole time we were saying, “Can we have…” What’s the minimum that needs to be there, that’s enough people to get it a real value. Can we make it work? The question was, “Can we make a half a gig work? Yeah, we can make 100mb work but nobody gives a…
Stephen: I don’t want to put money in the jar there.
Jason: No. You do want to put money in the jar.
Stephen: Maybe, we’ll donate afterwards. The reality is that it’s easy to make 100mb work, or something like that, but we needed to make it compelling. We needed to make it compelling enough where people talk about it and want it.
Jason: Jason: Yeah. 500mb is just ridiculous. That means I could do what? Like a couple of days of work for free.
Stephen: The reality is that 70% of americans use under 500mb, on their smart phone.
Jason: That’s so disruptive, dude. What are your wholesale prices like?
Stephen: I can’t…
Jason: You can’t say exactly.
Stephen: I can’t say exactly.
Jason: But what are wholesale prices? If AT&T were selling wholesale 5G, what could they sell that wholesale for?
Stephen: Well AT&T is going to be expensive.
Jason: OK. I’m just curious. What do you think it’s going to be?
Stephen: AT&T’s probably between $20-$25, a gig.
Stephen: Now, they’ve got retail running the shops, in those companies. The reality is that we’ve got significantly better deals. Clearwire is obviously aggressive at wholesale and Sprint is very much aggressive in wholesale. “By the way, both of those companies by in to what we’re doing. They’re willing to work with us and give us great deals, as well.
Jason: Is this why the Kindle Whispernet… How does that work? You know where you buy a Kindle and it’s always got connectivity, right?
Jason: It’s like built into the price of the device?
Stephen: Amazon is covering dome wholesale cost on that.
Jason: Who do you think they’re buying it from? The majors? Or you’re not sure.
Stephen: I’m not sure. I think they have multiple network providers.
Jason: Are we going to be living in a future where you can buy devices and have limited amounts of data coverage in them? Just as part of the acquisition price of the device, do you think?
Stephen: The way we look at it, if you actually project 12-24 months out, we’re actually going, from our perspective… right now we have devices that enable, sort of, free internet on top of the devices you use. The sleeve for the iPod. We’re actually going down a path where we think longer term of 2 years. We’ll actually sell core devices that come with the free internet in them. Or, we’ll have a SIM chip, for example. Just pop it into your iPhone and you’re done.
Jason: So you could actually get one of these taiwanese manufacturers to give you an MP3 player that had 4G, that was an Android device, then FreedomPop could have their own devices?
Stephen: Correct. We could have our own… Or,
Jason: A tablet.
Stephen: Let’s say you’ve got a device, say an Android that you don’t use anymore. Pop in a FreedomPop SIM chip…
Stephen: … and you’re good to go.
Jason: Holy cow. That is so mind-blowing. So people can be on vacation, take there old android phone with them, put a FreedomPop in there, if they don’t have good coverage or they need extra coverage, they’ve got an extra backup or whatever. Is it ever going to get to the point where, the internet will be available everywhere, for free? You’ll be paying just for some high speed, in a way. Like free low speed is going to be the norm?
Stephen: That’s what we’re hoping for. I think so because we’re going to enable and bring it there. The current market may not like that but, that’s where things are going to head.
Jason: Why isn’t Google giving you $50M to go out there and do this?
Stephen: That’s a good question. Maybe we should talk to Google after our conversation.
Jason: No. But, I mean, it makes total sense. They want to have more usage. Or, Facebook, for example. If Facebook really wanted to do something disruptive, other then this non-sensical search of your friends preferences is important. That’s not important. Nobody cares about that. Nobody will talk about that product, ten years from now. But, if they wanted to do a product that mattered, a FreedomPop/Facebook tablet or phone or smart device that had free, unlimited usage of Facebook. You get the device and it’s free to use Facebook, 100% of the time. Then 500mb… Sort of like, when you go on SouthWest. You can look at the sites that are paying them. I guess certain things are free. The SouthWest site is free. Wow. There’s a good time. Like, make USA Today free. Right? So the New York Times could come out with a tablet that you could open up anywhere. If you’re a subscriber to the New York Times, you get New York Times forever. Or, The New Yorker could come out with it. The New Yorker tablet. That was $150. That was just designed just for the New Yorker. That had New Yorker buttons on it. You could… I mean, are we going to get to that point?
Stephen: That’s a pretty good idea. We may get to that point. We may get to a point one, sort of, step further which is you take an Android tablet maker… pick yours… battling against the iPad or iPod. Think of… Let’s call it HTC for a lack…
Stephen: That’s one that’s not a huge player now.
Stephen: What if they came out with a tablet that said, “Free half a gig and free internet. This tablet comes with free internet. Any site you want. Half a gig a month. Powered by FreedomPop?”
Jason: They know that 1 out of 5 will upgrade. That’s enough to pay for the other 2.5G.
Stephen: We know… if it was powered by FreedomPop, we know… We’re a web company at the end of the day. So we work we understand email. We understand the intelligence behind, “You’ve used half of your free data and you’re 14 days into your period. We’ll send you an email that says, “Hey. You’re on pace to go over.” We have algorithms to get people to… We have all the intelligence. We good at getting people. Part of the beta… I’ll share this number with you. We’ve gone… When we launched 3 months ago, we had about 5% of people who were paying us any kind of money.
Stephen: Converting. Today, 3 months later… It’s just been 3 months… we’ve got close to 30%. So, we’re very good at that.
Jason: How did I miss this investment opportunity? I’m just dying over here. When he first made $10M, he’s probably made $50M valuation. I put in $50K…
Stephen: That’s good math.
Jason: It’s is F’ ing unbelievable. I’d be up like… The next round is going to be like a $300M or $400M round. I would be up, like 8X my money. I would have turned 50 dimes into $350K. That’s like 2,3 Tesla Model S’s. I’m killing myself. I’m killing myself.
Stephen: Then math works out like that. That’s actually…
Jason: I just think in terms of how many Model S’s I would get. I think, I would be up 3 Model S’s right now, on the original investment. It’s killing me.
Stephen: Imagine the garage there?
Jason: I know. I’m going to need a bigger boat. I’m going to need a bigger garage. You guys are going to get a zillion buy-out offers. This is just so disruptive. Are you going to sell? Or, is this like a religious thing for you guys, that you what to go big and get to… What is success? Put it that way. Is success for you guys flipping this company for $1B? Or, is getting to 50M subscribers?
Stephen: It’s more the latter. We started this thing, proliferate free internet. We wanted to make sure that everyone’s got access to free internet, as sort of a basic principal. We actually have the tagline, “The Internet’s A Right, Not A Privilege.”
Jason: Love that.
Stephen: The company believes it. Basically, we enable a business model that supports that mission. Vs. a not for profit. We actually enable a real business to support that mission. Ultimately, we want to make sure that everyone has access to free internet. By the way, one of the side effects of that should be that everybody gets cheaper internet. We should drive the market down to more tolerable levels vs. consumers getting pillaged.
Jason: Couldn’t a college give away… or some school give away… What’s the cost? I’m trying to estimate… What do you sell the iPod Touch case for? What does that go for?
Jason: $99. So, is there a little margin in there for you, or no?
Stephen: There’s a little bit of margin.
Jason: A little bit of margin. So, it could cost a little bit less. So, a school could just buy these and give them out to everybody for free. Are you going to get to the point that the hardware is going to be so cheap that you can give the hardware away for $10 or for free?
Stephen: That’s the hope. Yup.
Jason: How far away do you think you are? Is that a year, 5 years?
Stephen: The way we operate our business, is on a 3 year plan, timeline. But, as far as devices getting to the point where there’s little friction in them friction, we’re thinking 12-18 months.
Jason: Wow. So, the price of hardware is plummeting and your scale is such, the price of the hardware is going to drop to nominal.
Stephen: Correct. And, by the way, you start to get refurbished hardware coming into the inventory.
Jason: Ah. I see. Yes, yes.
Stephen: For example, we could get USB dongles, for example.
Stephen: Sprint has 3G/4G USB dongles.
Stephen: The reality is tablet proliferation, nobody really wants a USB dongle for a laptop, as much as they used to. So you can buy those sub-$10 now.
Stephen: Probably $3 or $4 in the next 6 months.
Jason: So they could be like a basket, in the library, of these things. You could just come up and grab one.
Jason: Sort of like Square does. Square gives away the hardware, from what I understand. That little reader is like $5. They say, “Just take one.” They just send it to you hoping it’s a tool to get you to activate it.
Jason: Eventually you’ll activate it, at some point. It’ll work out.
Stephen: Yeah. So, when you talk refurbished dongles, for example, same model. Less than $5 to buy these things. You can just give them out.
Jason: So disruptive. When did you know that this was going to work? It seems like just a couple of years ago, there was no way this is going to work, right?
Stephen: No. Let’s put it like this, even 18 months ago… 24 months ago, actually, there was just no way.
Jason: You modeled it.
Stephen: Yeah. So the reality is that 4G wasn’t there. So, you’re looking at 3G networks which are over congested and super expensive. Charging $25, $30 bucks a gig, kills the model. It wouldn’t have worked 2 years ago.
Jason: Cause it was so much scarcity in data networks?
Stephen: And, the 3G pricing’s very expensive. Really in the last… call it a year, year and half ago… with LightSquared coming out, the wholesale market shifting, 4G being built out, it’s sort of starting to enable a model like this.
Stephen: To be honest, I didn’t know it was going to work until about 2 months ago, when we launched the thing. We started to see that we can actually… there’s a viable business underneath the proposition.
Jason: What was your concern? What did you think would make it not work? That consumers would think it was too complicated.
Stephen: The biggest concern was, are we going to get killed from a cash perspective? Because there is a certain type user we lose money on. Like any freemium model, we’re losing money on a certain user. The reality is the users who love the service and want to use more and are willing to pay for more, there are very cheap prices. That’s what we want to see and we’re seeing it.
Jason: Do you have users abusing the system by buying 3 units and then rotating them every month? Then doing 1.5G for $300. Doing the math to try to hack it?
Stephen: We have some abuse.
Jason: That would be the abuse, right? Buy 3 units and know that in month 15, it’s better to steal a unit than pay. That’s so stupid. Who goes to that length to buy 3 devices?
Stephen: Fortunately, there’s some people doing it but not enough to where it’s a big issue, for us. If it is, we can start cracking down on it. We allow users to add friends and earn more free. So, we have users who are abusing that a bit. Right now, we’re fine with it. It’s not a major abuse. It doesn’t hurt us as much.
Jason: Yeah. You know what I find is, the abusers become your biggest fans. At some point the abuse is like… They get tired of gaming the system, because it’s so much work to game the system and create all those free Yahoo accounts to create the second account so they can add their friends.
Jason: It’s too much. It’s like burning Blu-Ray DVDs. Right? I thought, “I’ll get a Netflix account and burn DVDs onto my laptop and I’ll return them. I’ll be able to get a bunch of movies.” Then I opened up a Blu-Ray disc, so I could burn it, so I can watch it on my laptop. Because I don’t have Blu-Ray on my laptop. I said, “This is going to take me like 8 days to burn a Blu-Ray.” It’s just built into it that it’s too much work.
Jason: I’d rather just pay for the iTunes Blu-Ray.
Stephen: That’s exactly… The rates are so cheap. Just pay for… I think that is exactly the point.
Jason: Excuse the guitar, there guys. I knocked down my ukulele. Sorry. So, now how confident were you pre-launch, that this would work? 50/50? 60/40?
Stephen: You’re pretty confident going in.
Jason: Right. 70%. 80%.
Jason: Where are you now?
Stephen: Now, the confidence level’s a lot higher.
Jason: You know this is going to work?
Stephen: We’re nailing it. As far as the business model, it’s being validated. We’re actually making solid improvements, continually. I think we can get even further. Now, it’s more about, let’s get ready to ramp the heck out of this thing and really take over.
Jason: Now, internationally, it would very hard for you to go to India or China or Europe with this model? There aren’t wholesalers? The markets are a little bit… even more… I don’t want to use the word corrupt… in Europe it’s not, but I would assume in India and China they would just not let you do this.
Stephen: China, actually just last week announced that they are… their government… they’re opening up for MVNOs.
Stephen: So China is a viable market.
Jason: MVNO, for the audience, stands for? What does it stand for?
Stephen: Mobile Virtual Network Operator.
Stephen: That’s basically, someone who’s buying wholesale and reselling.
Jason: Like, Virgin did?
Stephen: Like Virgin did.
Jason: Sky’s company.
Stephen: We consider ourselves more as an ISP, Internet Service Provider to an MNVO.
Jason: Because you’re doing data.
Stephen: Right. China just opened up. You’ve got countries, like Brazil, that are actually opening up for that as well. Europe’s already open for that. There is international expansion to the extent that we can find network partners in those markets and… between you, I and your audience, we’re actually having some discussions with some of those as well.
Jason: Why hasn’t the shared wi-fi phenomena taken off? The idea that I can share your wi-fi network. I get a log-in. Obviously, the company in Spain, that Google invested in…
Stephen: And me at BT, by the way.
Jason: Which was the other one?
Stephen: is the company, the spanish one.
Jason: What did you say? You invested in it?
Stephen: I said, while I was at BT
Jason: Has Fon taken off or not? Why not? Explain what Fon is, to the audience.
Stephen: Fon is basically an open wi-fi company. Meaning that somebody has broadband at home. Part of their broadband is allocated to external users, then they use the rest. Say if I was at your house, I would see…
Jason: Or outside of my house, in the car.
Stephen: At a parking lot, or whatever. I would see your signal and I would pay to get on to your network.
Stephen: That’s Fon’s model. Now, are they taking off? They actually have a big install base, but it’s not through organic consumers saying, “I want the service.” It’s through deals.
Jason: It’s bundled?
Stephen: It’s like BT saying, “We’re going to do a deal with Fon. So, every router we ship to a U.K. resident has that software in it.
Jason: If you’re sharing your wi-fi on Fon, you can use other people’s. Sort of like a collective or something.
Jason: Time Warner, I think, is doing that now in New York. Every router they send creates a wi-fi hotspot for other Time Warner users.
Jason: So this is another way to get a little extra bandwidth out there. Make things a little stickier.
Stephen: Correct. Now, what’s interesting is if you think in terms of the Fon model, 99% of the Fon routers are residential. There’s no sharing going on, cause there’s no people around them. If you live in a populace area.
Jason: Yeah. Unless you live in an apartment building.
Stephen: Yeah. An apartment building.
Jason: In which case, you would be in your house. Therefore, you would be using your own.
Jason: So it’s sort of DOA, by definition.
Jason: Well not DOA. It’s sort of, of limited use, by definition.
Stephen: Right. That is the number I heard at BT. I think like 1% of those Fon routers actually get what they call ‘alien’ traffic on it. Most of them are just normal routers.
Jason: Of course. It makes total sense.
Stephen: What we think is interesting, imagine having wi-fi on a device like this. You’re at LAX…
Jason: Oh, my God.
Stephen: That’s actually… I’m just going to drop that little nugget now.
Jason: So, I have a FreedomPop log-in. There’s 10 FreedomPop users around me who have a free device. So, if using a free device with 500mb, it’s automatically an open hotspot.
Jason: Oh, my God, is that disruptive.
Stephen: Even if you don’t have a FreedomPop device and somebody else does and you see a free internet signal coming from his device and you can log in.
Jason: Oh my.
Stephen: You can, maybe, get 50 free mb. Or, you’re at LAX or whatever the case may be.
Jason: Right. That’s an incredible way to do customer acquisition. So, I see a FreedomPop open network and I can get 5mb. I can get 5mb or 50mb just for giving you my email address. Then you can up sell me on the device. If I get the device, now I’m upselling to other people.
Jason: So genius. What about cars?
Stephen: Cars is actually… You’re hitting the nail on the head as far as… BMW announced they are going to have LT in very car. I think you’re going to see car manufacturers start to include that. As far as we’re concerned, that’s a huge market and you can have a huge install base of cars that don’t have it. We’re going to have devices that are more car form specific.
Jason: Is part of the problem with the cars is how to power them in the car? You have to plug them into the cigarette lighter. It’s kind of a ganky experience?
Stephen: I think…
Jason: It has to be built into the dash.
Stephen: If you think, it’s got to plug into the cigarette lighter. These things have an 8 hour battery.
Jason: That’s a good idea. A cigarette lighter that was the device.
Jason: You plug it in and then it still has the power adapter out of it. A passive one, right? So, it’s got a male and a female. So, you plug in the FreedomPop thing and you still don’t compromise your cigarette lighter. You can still plug in your car charger.
Stephen: Right. Think USB dongle, but instead of plugging it into a USB, it’s still plugged into a cigarette lighter.
Jason: And, it still has the female plug so you can plug in your thing.
Jason: Oh, my God, that is so genius. I love what you’re doing, dude. It’s so epic.
Stephen: That’s what I like to hear.
Jason: How do you manage something that is obviously going to be a break-out success of making money? Is your philosophy just to raise as much money as possible? You looking a strategic investor? your raising money now. So, that won’t get you in trouble any more since they changed the rules about it. If you had your druthers, would you want a pure venture investor, like Sequoia or Andreessen-Horowitz or Social Capital Partnerships- Chamath’s fund, Benchmark- Bill Gurley’s firm. Or, would you like to have a strategic like Google?
Stephen: That’s a good question. Right now, we’re not proactively out there aggressively raising money. We don’t need the money.
Jason: No. But you’re getting pinged.
Stephen: Yeah. We’re getting pinged. We’re having some discussions. We’ll probably get a little more aggressive in 3-4 months.
Jason: You’re always talking. Everybody’s… A good founder’s always talking.
Stephen: To answer your question, strategic is actually kind of interesting to us.
Jason: Why is strategic interesting?
Stephen: To be honest with you, at this stage, I’m not sure how much value a VC is going to bring to us. Sorry.
Jason: It’s true, though. Most VCs in the valley, you have 3 great ones, so how much value does a forth bring?
Jason: That’s a fair statement.
Stephen: The company’s moving along. A strategic may be able to actually bring additional value. In TelCo partnerships are important. Having companies that, sort of, lubricate partnership discussions also helps. So, yeah it’s great to maybe have a VC make an intro at some brazilian telco, but you know what? If QualComm or Google or Sprint or some of these guys made an introduction, it’s probably more compelling.
Jason: Do you know Salar, over at YouTube?
Jason: This is what they should do. They should come out with a YouTube device that’s got FreedomPop on it. It’s free to watch YouTube videos on that device. If you pay, it turns on Gmail, web browser and everything else. But, the YouTube app is free. Cause those mobile users are so valuable to advertising. Can you imagine if there was a YouTube iPod Touch, for a lack of a better term. Sort of… I actually just got this device. I was making fun of James Altucher for having the Galaxy Note 2. I can basically serve drinks on this thing. I can be like, “I’m sorry. Coffee, tea.” You can fit two cups on here. It’s unbelievable. Have you seen this thing?
Stephen: I haven’t actually.
Jason: Look. If I hold my phone up to read something, you can’t even see me. I mean, what dork holds this to the side of your head? I feel like I’m…
Stephen: You need to get a headset for that thing.
Jason: You have to have a headset or you look like a huge douche. But, can you imagine if they could get this device down to $99 or something like that. Which is… and it said YouTube on the back of it. You got all these kids hanging out. Watching YouTube videos constantly. It’s free to watch YouTub videos, anywhere. Oh, my God. That would be incredible.
Stephen: I like it. I like the way you’re thinking.
Jason: It’s got to be Google who does this. They’re the only ones who has the cojones in the industry… You know, actually Bezos is kind of a madman too.
Stephen: Facebook’s getting up there too.
Jason: You know the problem with Facebook is, everything’s about them. Like, they would love to do what you’re doing. They’ll do like 3 ten hour deep dives with you and then they’ll just steal your ideas. That’s all they do. Look what they did with Poke.
Jason: It’s like a complete photo copy ripoff. Who’s the entrepreneur you respect most, when you look at the entrepreneurs out there, who are currently practicing? Then, give me a historical one.
Stephen: OK. I’m going to start with historical, that’s easier.
Jason: That’s easy.
Stephen: That’s going to be Niklas and Janus from Skype. What the did with Skype and voice and TelCo industry, we’re very much modeled after.
Jason: Disrupted it, is what you mean?
Stephen: Disrupted it in a big way. Provide free voice to the mainstream by the new technology, ten years ago at the time, VoIP.
Jason: It kind of is mind-blowing when you think about what they did, if you think about it. Because, these people who are… I was talking to somebody, who couldn’t believe that they talk to their mom, in India, for free. I think it was Om Malik when he was on the show was like he just sits there and can’t believe the network is so powerful and free that he can talk to his mom, in India, once a week, for nothing, essentially. Pennies.
Stephen: Now, we take it for granted. We think it’s just normal.
Jason: It was $5 a minute to talk to his mom.
Stephen: Ten years ago is was massive. It was huge. It was one of these things that sounded too good to be true and now it’s the norm.
Jason: I’m getting shades of that. I talk about FreedomPop, I feel this is too goddamned good to be true. When you talk about Skype, how is this possible? Everybody said, “Oh. It’s going to fail. It’s going to fail.” That’s what they’re saying about yo guys. “You’re going to fail. There’s no way you can do it.” But, you’re doing it.
Stephen: We’re doing it. And actually doing it well.
Jason: OK. Who else do you respect. I got to tell you, it’s an incredibly savvy move to have your investor as your favorite. So, I gotta get your second. But, I do respect the savviness of that.
Stephen: Before I move to my partner in textPlus. They’ve got, sort of, shared ideologies on disrupting TelCo as well, on the voice side. The guy from DropBox. I forgot his name.
Jason: Drew Houston.
Stephen: Yeah. I’ve actually never met Drew, in person, but I’ve seen a few of his presentations.
Jason: He launched at the first Launch Conference at the TechCrunch 40. Brilliant guy.
Stephen: When you look at DropBox. Great company, great product, but they also understand the value of the product. They understand the whole end to end business. The mechanics around it, the viral piece, customer acquisition.
Jason: So it’s this whole diligence knowledge of their customer and the whole ecosystem.
Stephen: They’re mentality is very much in line with what we’re try to do. Which is a sort of, test before you invest mentality. They don’t go in there to invest millions of their dev resources into an idea, before they’ve sort of vetted it a little bit.
Stephen: I like that mentality.
Jason: He’s a wicked smart guy. I remember meeting when he pre-launch. I guess they were coming out of Y Combinator. The presentation crashed a couple of times. But, the Sequoia guys were like, “This is going to be big.” I just looked at it. There was a big sign above Drew’s head that just said, “Winner. Winner.” It was like a neon sign. Like, “This person is going to be huge.” Then for him to turn down Steve Jobs, according to reports. Can you imagine Steve Jobs comes to you… Steve jobs comes to you and offers to buy your company. I don’t know that I’m big enough to be like, “No Steve.”
Stephen: That’s a tough one to turn down.
Jason: Be honest.
Stephen: I don’t know that I would have the balls to do that.
Jason: You don’t have the balls to do it. Clearly, I don’t either. But, Drew has cojones the size of basketballs or something. I don’t know what that guy has got. He said no to Steve Jobs, who was suffering with Mobile.Me. What a disaster.
Jason: Steve Jobs comes to you to solve your problem, you are baller.
Jason: Think about that. Steve failed… not that Steve failed, his team failed him. Then, he goes to Drew Houston and says, “Solve my biggest problem with the cloud.”
Jason: And, Drew says, “No.”
Stephen: You had me at hello, kind of thing, with Steve. He knocks on the door, the deal’s done.
Jason: God Almighty. So, you’re sold out now. Is there anything that people can buy?
Stephen: We were actually sold out. We just got our iPod cases. New shipment in now. We’re selling those again.
Stephen: We’ve got those… which we call the Photon, which is the mi-fi.
Jason: It’s tiny. Like the size of an Oreo.
Stephen: Two Oreos maybe.
Jason: Yeah. It’s a Double Stuff.
Stephen: Exactly. We also have the dongles. Which you can buy now.
Jason: Dongles weak. I don’t like the dongles.
Stephen: We have a lot of dongles. That’s the one thing we don’t run out of. There cheap and nobody wants them.
Jason: The dongle looks bad. You know what? The dongle dates you.
Stephen: It does.
Jason: It makes you look old. What about this iPhone case. When is the FCC going to approve that?
Stephen: Hopefully anytime.
Jason: What does the FCC have to approve? It’s a case.
Stephen: Here’s what I don’t get. What’s frustrating me about the FCC. You’ve got this. Basically, no problem with it. The iPod case. Now, what they want us to do. or equipment manufacturers, Is to play with the iPhone. Disabling antennas in the iPhone, which have nothing to do with the case. They want to test what happens with the case when the iPhone antennae are broken. Or, things that are complete independent of the case.
Jason: Oh. Red tape.
Stephen: Red tape. Red tape.
Jason: You say that with a level of slight perturbedness, which might indicate that you think there might be something at play. Do you think the FCC is on your side? Do you think their against you?
Stephen: Boy. That’s a loaded question. Cause, I want the approval to go through pretty damn quick.
Jason: Exactly. But, let’s just say, a healthy amount of suspicion would be warranted.
Stephen: Let’s put it this way, the rigor and the types of tests they’re running this through are somewhat irrational.
Stephen: There is a bit of skepticism.
Jason: Who runs that, Julius Genachowski? Or, is that the FTC?
Stephen: It’s the chairman… no the chairman is… I don’t think their out to get us, just by the way, cause we’re actually…
Jason: No. I don’t think so.
Stephen: The FCC chairman…
Jason: That’s Julius Genachowski. I know him. He’s a great guy.
Stephen: He has a shared objective. He wants to bridge the Digital Divide. So, I don’t think
Jason: Yeah, this guy Julius Genachowski. I’m going to get him on the program. He is fantastic. That guy has been pushing so much stuff through and getting so much stuff lit up. He’s… I don’t know. I’m a big fan. He just got the really high-powered wi-fi through. That was something people were trying to stop. He’s been a good FCC chairman. I like him.
Stephen: At the high level the FCC has got shared objectives with what we’re doing. Don’t think it’s a
Jason: No. But, they’re trying to bridge the Digital Divide. That’s like the new FCC. “Let’s bridge the Digital Divide.”
Jason: Who cares about Janet Jackson’s nipple or Howard Stern’s Baba Booeys or whatever. It’s not like it’s of concern.
Stephen: We talked about passing out $5 doodles in schools. That type of thing. Which we’d like to get to. Very much strongly align with Julius.
Jason: Yeah. Julius really wants to… from what I’ve talked to him about it… he really wants to bridge that Digital Divide. Get broadband in America. God we’re so far behind. Do you think we’ll ever get the fiber stuff done? Or, does it have to be done mobily?
Stephen: To be honest the future is mobile. Mobile devices are going to win out in the end.
Jason: Oh. Because the usage will be on devices?
Jason: Therefore the solution has to be wireless.
Stephen: That’s what I’m getting at.
Jason: That’s really smart. I never thought about that. I wish fiber was available. People would pay to have an unlimited amount to have fiber. We’re not investing in this country. It’s like up to guys like you. You have to pirates come in and be like, “We’re going to screw things up. We’re going to really shake things up.” My God, why can’t we get it together as a country? Our government is so dysfunctional.
Stephen: First we gotta make sure we don’t default on our debt.
Jason: Ohhh. Really, our country should literally give you guys $10B and give one of these to every citizen.
Stephen: I wouldn’t mind that actually.
Jason: That would be such a great idea. No, forget about every citizen. We’ve got 70M kids or something like that? Give every kid a FreedomPop router, or something like that. Let them put it on their bicycle. Then everybody… Actually, any kid that’s on food stamps. Here’s an idea that nobody could argue with. I would pay taxes. I would increase my taxes. I pay a lot of taxes. Let me tell you. I would increase my taxes in order to pay every child on food stamps gets a tablet, right now.
Stephen: I’d buy that.
Jason: With FreedomPop on it.
Stephen: Even better. Even without FreedomPop.
Jason: At least it gives them a fighting chance to get some more information. To get a skill.
Stephen: Yeah. Any kid who’s not on food stamps… any yuppie or middle class parent is going to have an iPhone.
Jason: It’s obnoxious to see these rich kids in schools who… I’m on vacation. Listen. I’m lucky I live a good life now. Man, I would have been on the other side of that. I see these kids when I’m on vacation at the Four Seasons with their iPhone 5′s. I’m like, my wife doesn’t have an iPhone 5 yet. She’s waiting to come out of a contract. These 12 year old kids, 3 or 4 of them are running around with iPhone 5′s. You know these kids in the ghetto have nothing. Zero.
Stephen: Yeah. I was on a plane last week. A family of five. Each kid had an iPad. It like exacerbates the Digital Divide.
Jason: Yeah. You know what? Where is the best educational software? Where is the best educational videos? On your iPad. There’s all these free apps or $1 or $2 apps. There’s Khan Academy. The rich kids get more access to better tools and better content. What do the poor kids get? They get screwed, again.
Stephen: Yep. By the time a kid comes into kindergarten…
Jason: Oh, they’re screwed.
Stephen: … coming out of middle class.
Jason: If they haven’t gone to a pre-K now. The stuff my daughter is doing… I’m sorry… in nursery school is ridiculous. I didn’t even go… You know where I went to nursery school? My grandmother’s house. My irish grandmother. I hung out with my drunk irish grandfather who took us to bars.
Stephen: That explains a lot then.
Jason: It does, doesn’t it. Goddamn. It always happens…
Stephen: Now you’re all worked up.
Jason: … at the end of the show. It’s crazy. Stephen, I wish you a lot of luck with FreedomPop. I am really rooting for this company. I’m kicking myself that I didn’t get to get in the angel round. I don’t know where I was, but apparently not on the radar. I gotta go buy some shares in the secondary market. This is going to be a $1B company within 3 years. I’m telling you right now. I’m betting right now that Google buys this company for $1B. Google or Amazon will buy FreedomPop within the next 3 years for $1B. I guarantee it. Anybody want to make a sushi bet? Cause I will bet that. If you make the sushi bet, you automatically win.
Stephen: I can’t turn down Steve Jobs but I might can turn down Larry, if he knocked on my door.
Jason: No. You know what? Google would put a good price on it and they would give you the ability to reach such a large group of people that it would accomplish your mission. It would be like an acceptable outcome. Cause you know they wouldn’t screw it up. Look at their acquisition of YouTube and how well that’s gone. Steven Chen and… anyway. The founders of YouTube must be looking and be very happy with the progress and the stewardship of Google.
Stephen: That’s true. That’s true.
Jason: They haven’t killed the brands.
Stephen: They exploded YouTube. platform now.
Jason: In every country. 800M people a month. That’s more important than Facebook, I think. I don’t know. Who knows? If you want to get a FreedomPop, and I highly recommend you do buy one. Even the rich members of my audience. Which is the majority of the audience. Just go ahead and buy one of these things. They’re $100 to support the company. Buy that little Oreo… what do you call the…
Stephen: The Photon.
Jason: Buy the Photon. So you have it as a backup. It’s $100. But you buy it, they probably make $20, $30 a margin. That’s cause you’re helping this company. You’re doing a good thing. You want them to survive. You got it as a backup. In case you’re over on your current plan. Go buy your kid one of these casual 2G plans that’s only $17.99 a month. It’s a brilliant idea. FreedomPop.com. FreedomPop.com. Follow @freedompop. You guys got @freedompop, right?
Jason: And you’re @stokols?
Jason: On Twitter. You’re hiring, I’m sure.
Jason: What kind of people are you looking to hire?
Stephen: Right now we’re looking for engineers primarily.
Jason: What kind of engineers? Be more specific.
Stephen: Big gap on front end. So we can do more on the front piece.
Jason: The website’s a little broke. Yeah.
Stephen: I wouldn’t go that far, but alright.
Jason: No, come on man. The design of the website… Actually it’s alright. I’m just saying, it could be a lot better.
Stephen: Could be a lot better. Absolutely.
Jason: I give you a 7 and a half, of 8. You get an extra point and a half if you get a world-class designer. It’s OK. It’s serviceable. Then you don’t want to be putting all your money into the design of the site. You want to put it into lowering the prices.
Jason: So, if you’re looking for a great designer. What else are you looking for? Front end.
Stephen: Outside of that, we’re actually…
Jason: What about apps? You gotta have some apps to compliment this stuff, right?
Stephen: You just introduced me to a pretty good app developer, right here.
Jason: I did. Sundeep, from Extreme Labs is…
Stephen: We do have an iOS app and we have an Android app that’s launching in about a week.
Jason: What do the apps do exactly?
Stephen: The apps right now, is account management, primarily. You can see how much you’ve used. You can also earn more free through offers or inviting people through the app.
Jason: I love that idea of I can do certain behaviors… you’re not going to get into that cheesy like, I’m going to earn more manna for this game kind if stuff.
Stephen: We try to keep the offers pretty legit. Some of the offers are like, “Print a coupon to Chili’s and you get 20mb.” Or, something like that.
Jason: That’s fine. That’s quid pro quo. If Chili’s is the audience for a free device, that’s fine. Kids have more time than money. They print out a coupon, that’s worth it.
Stephen: It’s amazing how many people go down the earn path to earn the free vs. just paying what it would cost $1.
Jason: Oh, is it? What percentage of things?
Stephen: I don’t know that off the top of my head.
Jason: Double digits?
Stephen: Looking at the revenue that’s coming in a year, it’s more than I would have expected.
Jason: See, that’s what I think, you guys are going to get to the point where like, do you remember the company Free PC, that Bill Gross did?
Stephen: I don’t.
Jason: You get a PC for free. It was an idea lab company. The idea was give people a $600 or $700 PC for free, if they buy internet access. Or, give it to them for free if they watch ads. Now that the devices are so cheap you could give somebody a 7″, $99 thing. If you could make $1 a month of them, $2… You have to make whatever $5 a month off of them to make it eventually work. When the pads get down to $49, like they are in India.
Stephen: Those Android pads are getting sub $99 already.
Jason: It’s crazy. The nominal cost. It’s going to be like… it’s going to be free. I think you’re going to go to restaurants or cafes or places and there’s just going to be stacks of tablets. Just pick one up. If you steal it it’ll be like stealing headsets. You know what it will be like…
Stephen: It’s like stealing the Sports Illustrated off of the doctor’s table.
Jason: Perfect analogy. Or, stealing the headphones from an airplane. At a certain point they collect. Remember they used to go throughout the whole thing. “We’re going to give out the headphones, now. We’re going to collect the headphones.” the headphones cost us $2, keep them.
Jason: We’ll bake it into the price. If you leave them, we’ll have them cleaned up. Please keep them. It’s our gift. That’s what FreedomPop’s going to get to. It’s going to be so cheap, you’re going to be able to give these devices away for free.
Stephen: That’s what I’m hoping.
Jason: I’m guessing first name or last firstname.lastname@example.org works for email. I’m not going to give out your email.
Stephen: You just did, but yeah.
Jason: I’m guessing. I’m guessing.
Stephen: 50/50 now.
Jason: 50/50. Stephen Stokols will work @FreedomPop if you’re a great designer. I think this is an important company. You can go there and have a sense of mission. So, if you’re a great web designer or app developer, in Los Angeles or the surrounding area, please email them. Be part of something important in the world. Digital Divide. Stephen it was great having you as a guest.
Stephen: Great being here. Thanks.
Jason: Continued success with FreedomPop. If this comes on second market or something like that and you’re an accredited investor, I think you’re going to stock up in the shares. I’m not telling you what to do or giving you investment advice. The second I have a chance to buy 25 dimes… I’m going to buy a cranberry off of Stephen, right now. That’s what’s going to happen. the post show I’m going to try to buy someone’s common shares. We’ll see you again next time. Thanks Igloo. Thanks, Oh my God, Share File from Citrix. What a great… always to have a great sponsor. Always great. We’re sold out for six months. Thank you, Jason Demant for selling out the show. Thank you for Brandice for solving all these audio problems and making everything flawless, traveling, following me everywhere I go around the country. Taking 6AM flights. I know that’s brutal. Carrying all that heavy equipment. That’s brutal. I’m not helping you with it. Thanks Kirin for booking great guests. We’ll see you all next time on ThisWeekIn Startups.