Loopt's $175M Valuation Rumor

I got a call late Friday night from a buddy in Manhattan asking if I'd heard the $160M finance round rumor for location-based social software start-up, and Sequoia venture-backed Loopt . After digging a bit more, the $160M number is wrong. In fact, Loopt's valuation is more likely close to $175M per a recent SEC filing according to sources close to the Stanford dorm-room company.

Following an additional weekend call with an application provider Loopt previously considered acquiring, I learned Loopt has surpassed 100K subscribers [all on Boost Mobile, with Sprint coming online soon]; a fraction of the existing Boost subscribers are paying customers [typical, considering Boost's pre-pay penny-strapped demographic]. Compare this accomplishment to an approximate 5% penetration rate for Verizon Wireless' subscribers using VZ Navigator, while tacking on a $9.95 MRC per sub for 3.5 million subs, and any reasonable mind would wonder how Loopt has bloated this valuation. Moreover, it's beyond most why Valley investors or potential suitors would pump out $175M into a company that sells a mobile social software for a $3 MRC, distributed exclusively through on-deck Carrier offerings.  It is not because there's a promising future in selling social software downloads on Carrier decks, especially considering individual Carriers are reluctant to support locator applications distributed by archenemies.  Furthermore, interoperable US mobile social wares augmented with Carrier-produced Location are simply too challenged due to a cross-carrier resistance to share Location openly across competing networks. Even if interoperable Location were possible in the near term similar to SMS and MMS transaction traffic traversing networks thanks to aggregator's like Verisign, there's still the challenge of charging for social software's. Users accustomed to using Web-based social wares simply won't adopt a pay-for mobile alternative in masses.

So perhaps Loopt's buy-in tact for this amount of cash is to play into the Facebook phenomenon and milk the investor influx headed this way already. There's no question social software's are hot; Facebook's $10B valuation is proof. With 43M sets of eyeballs it's no wonder why.  Sponsors are salivating over the opportunity to advertise to them all.  But Loopt doesn't have a Facebook 'for-free' support model yet, nor do they have millions of eyeballs.  So despite aspiring to become the de facto mobile social software provider with the competitive advantage via a mobile Location aggregation service and broker for all five US Carriers plus a few MVNOs, Carriers [namely the Bells] aren't going give this stuff away yet in an ad-subsidized model or cooperate with each other for that matter.  ...Perhaps Loopt's hopes of a hard-earned $175M might best be secured through the Web—a player with the means, will, planned transport, and a GPS handset to bypass Carrier resistance. Is there someone like that out there? If Dodgeball's debacle is any evidence, I'm skeptical, but wish the outfit my best nonetheless...