Who's the next Victoria Ransom? This guy

Congrats to mobile advertising entrepreneur Guy Horrocks, who has just bagged $US2.4 million in a funding round for Carnival Labs, the company he cofounded with Cody Bunea.

The money came from an investment round let by New York venture capital outfit Lerer Ventures Gary Vaynerchuk with participation by additional investors: Flybridge Capital Partners, Bowery Capital, Google Ventures, David Tisch (BoxGroup), Jos White and Michael Lazerow.

Horrocks won't say what percentage of the company was nabbed by the new investors.

But he does say he and Bunea maintain majority control.

Horrocks describes the new investors as a "dream team." They certainly have some hits on their CVs.

Gary Vaynerchuck was an early-stage investor in Victoria Ransom's Wildfire (sold to Google for $US250 million), Buddy Media (bought by Salesforce.com for $US689 million), Tumblr (recently bought by Yahoo for $US1.1 billion), Twitter and Uber. 

Lerer Ventures led the funding in Buddy Media, Huffington Post (sold to AOL for $US315 million) and Business Insider.

Flybridge were lead investors in Crashlytics, a company sold to Twitter.

And Jos White sold Message Labs to Symantec for $US695 million.

The second piece of news is that another New York-based ex-pat Kiwi, Jonty Kelt has joined Carnival's advisory board. He's not a bad man to have in your corner; keen NBR readers will know Mr Kelt last year raised $US40 million for his media focused e-commerce service.

"This is a major milestone for a young Kiwi technology company and we hope that it helps pave the way for more young entrepreneurs to succeed in the US market. This also hopefully builds upon the US perception of New Zealand as a creative technology hot spot," Horrocks tells NBR.

The new investment will help Carnival grow its mobile marketing platform for brands in the US market, Horrocks says, but it will also maintain and build on its Kiwi base.

"We intend to keep the core of our company based in NZ with a new engineering office in Auckland to compliment our Wellington headquarters, and are now aggressively looking for talented rails and mobile savvy web developers to join the Carnival," Horrocks says.

"We are under no illusions that there are now some large expectations for us to deliver on a much larger scale. However, we are eager for the challenge."

The new Victoria Ransom?
In August 2012, ex-pat Victoria Ransom sold her social media marketing company Wildfire to Google for $US250 million.

A lot of people have asked, Who'll be the next New Zealander to strike it big on the US tech scene?

The same month as the Wildfire sale, Time Warner launched its Time/CNN Convention Floor Pass app, namechecking Carnival as its developer. The media giant will be pushing the app around its coverage of the Republican and Democrat conventions as the Obama-Romney race heats up.

It's the latest win in a 12-month bull-run for Carnival.

The company's story reveals a lot about whether you have to leave NZ to make it big; some power networking among a clutch of power Kiwis in New York; and Horrocks' uncanny ability to be in the right place at the right time at key moments in the smartphone revolution, from the development of the first iPhone Twitter app to Words With Friends maker OMGPOP's near-death experience.

I caught up with Horrocks in June in Auckland, at a time when the Time Warner deal was still under wraps. Horrocks, now based in New York with business partner and Carnival co-owner Cody Bunea, was in town for his final US visa interview.

$US8 million buyout offer
At the time, Carnival had fielded a casual $US8 million buyout offer from a New York ad agency.

Horrocks wasn't selling.

His privately-held company is making a seven-figure profit, he told NBR.

It was all being invested back in the business, which was growing fast.

But it was also difficult to value.

For a mobile ad agency - like Auckland-based The Hyperfactory, which sold to US media company Meredith, drawing its founders to New York - a multiple of two-times earnings was standard, Horrocks said. You were buying talent, and contacts, but not any intellectual property.

Carnival, by contrast, has developed its own IP - a software-as-service messaging notification product called Core Push.

Push in Boots
Core Push was first tested in November as part of an app (also created by Carnival) to promote DreamWorks' animated movie Puss in Boots.

A key problem for any mobile marketing app (or indeed most mobile apps) is that many might download it, but then only around 10% will actually use more than once.

"So we did a test with it late November with DreamWorks," Horrocks says.

"The day the movie came out they wanted to drive all the people [who had previously downloaded it] and the movie, so we made everyone in California’s phones purr like a kitten and vibrate.

"So they pick it up and the Puss in Boots application comes up and says 'Do you want to accept a call from Antonio Banderas?' And they pick it up and he’s like [Horrocks launches into a passable Antonio Banderas imitation]  'Hello my friend, welcome on this journey.'"

A two-for-one offer was pushed as part of the app promotion, and a stunning 30 years of time spent in the app the day the movie came out.

By June, Core Push was being used by a dozen Carnival clients, with around four million messages a month being sent to their apps.

A user-friendly back-end displays a map of the world. Dots appear where people are opening the app.

By year's end, Carnival wants to be the second largest player in the push notification market. An iPad app is in the works that should help move things a long. A market exec will, for example, simply be able to draw a circle around the states or regions where they want a message to be pushed to app users.

The competition
The biggest player in the market is 18-month old Urban Airship, which Horrocks says has a private equity value of $US300 million. 

"Airship has around 30,000 apps using their product to send to 350 million users," Horrocks says.

"They’re good at monetising it. They charge a monthly fee based on your number of users. So if you have 100,000 users and you pay one cent per user it adds up, a lot 500,000 users you’re paying five grand a month and it’s probably costing them $US400. So it’s the kind of thing that has a really good margin if you can reach that scale."

Carnival Labs has worked on mobile apps for a long list of clients, including Kraft Foods, Honda, Trojan, Budweiser, Nestle, Intel, Air New Zealand and the NZ Herald, which NBR understands is an Auckland-based newspaper.

But looking ahead, Horrocks sees the company focusing on Core Push, and consulting services around it (a business modem crimped from Victorial Ransom at Wildfire).

One investor has offered to take a $US2 million stake, which would help fund immediate expansion. 

San Fran, and the first Twitter app for iPhone
So how did he wind up in New York, with investors offering him millions?

His first taste of the big time came when he was partners with Layton Duncan in Polar Bear Farm (still run by Duncan in Christchurch), one of the first companies in the world to focus on iOS development.

The pair were contracted by US company Tapulous, which flew them up to San Francisco. There, they spent around four months working on Twinkle, the first Twitter app for iPhone.

They also worked on a language-teaching app for another San Francisco company, Voxy.

Both apps were put together under remarkably quick time. Soon after Voxy sold for $US8 million, an in July 2010 Tapulous was bought by Disney for around $US50 million (its CEO now heads Disney Mobile).

Horrocks was proud of their work but also thought, "Man, we should have got some shares or something."

Relocating to New York - but keeping the dev team at home
After founding Carnival back in Christchurch, Horrocks worked with ad agencies, and mobile marketing app specialist and NZ success story The Hyper Factory, through which it landed work with US multinational Kraft Foods. That went well, until The Hyperfactory (or at least its new US owner Meredith) moved developement jobs from NZ to India.

Horrocks headed to New York to rustle up work, and found it when Kraft approached Carnival for a fresh project.

Carnival embarked on a new phase. Where previously it had worked through agencies (including Saatchi & Saatchi, Ogilvy and Drogba5), it now worked directly with most of its clients, handling creative, client management, building apps - and now keeping people engaged with Core Push.

Horrocks and Bunea relocated to New York, reeling in and managing clients for a development team back in Christchurch.

The Carnival CEO sees the model working well long term, helped by the time difference.

"We talk to clients and have meetings at the end of the day, then the next day the work’s already done," he says.

New Zealanders talented .. and cheaper
Kiwis are creative and hard-working and also, to be blunt, cheaper.

In the US,"The starting salary for a mobile developer might be $US70,000 to $US100,000 and you're paying twenty five grand to a recruiter," Horrocks says.

"I know the cost of living in New York is a lot higher. But  that’s a lot of money. 

"Locally, you can find pretty awesome mobile developers in a range of $40,000 to $60,000 or $70,000 – wicked developers who’ve built maybe five to 10 apps."

A developer who's 45 might have a lot more experience in programming - but in the brand new area of smartphone and tablet apps, someone two years out of uni could have just as much knowledge.

Leaving Chch after he quakes
But while he's in favour of keeping - and building - staff in New Zealand, Horrocks didn't want Carnival to stay in Christchurch after the quakes.

"It was just a mess," Horrocks says. "Our building got destroyed. We were on Madras St [home of the collapsed CTV building]. We had an office we’d used there for about a year and a half. The whole block’s been knocked down now.

“It’s just a disaster and it’s hard to find staff. You’re trying to service US clients and it’s really messy, so we moved to Wellington. We went up there then scaled to 10 staff from four staff."

Witness to one of the new dot.com boom's crazier moments
Up in New York, Horrocks and Bunea moved into the same office as OMGPOP - now famous as the mobile app developer that sold out to Zynga for big money in March this year (the amount was variously reported at $US180 million to $US210 million).

Horrocks confirmed the US media stories that OMGPOP got close to going broke. CEO Dan Porter had let go most of his developers and pressured two of his remaining team to come up with a hit. They delivered Draw Something, which when viral then the out-and-out smash Words With Friends. At the time of the Zynga takeover, Words was bringing in $US500,000 day in sales, advertising and in-app purchases.

Porter rehired staff he had been forced to let got, and Horrocks and Bunea were in the board room celebrating with them the day the deal was confirmed, and Zynga brass arrived with bottles of champagne.

It was a feel-good story for OMGPOP, but not so much (or at least it seemed at the time) for Carnival.

"It was like ‘Who are those random New Zealanders in the board room?' and we got kicked out as Zynga took control," Horrocks says.

Enter Mr D'Arcy
But again, fate intervened. Through one of the highest profile Kiwi ex-pats on the New York tech and media scene, AUT University alumni Mark D'Arcy (then in charge of Time Warner's interntional marketing; now head of global advertising for Facebook), Carnival had scored work with Time Warner.

The media giant gave Carnival an office in its flash new twiin office towers beside Central Park - where, sometimes landing new work has been as simple as walking down the hallway. "It's crazy," says Horrocks.

Networking in New York
More opportunities, and advice, followed through networking with other New Zealanders in New York.

Jonty Kelt (who recently raised $US40 million for his media focused e-commerce service), took time to go over Carnival's business plan with Horrocks.

"He said you can stay in New Zealand. But if you do, they'll be 10 others in New York who move faster," Kelt told Horrocks.

Other ex-pat mentors included Craig Nevil-Manning - one of Google's first hires and now heading the search giant's engineering team in New York. Google has supplied Carnival with Android tablets, and Android work now accounts for 40% of Carnival's development - although Horrocks describes the mobile OS it has tough going at times compared to Apple's iOS or Microsoft's Windows Phone.

If they can make it here
As a condition of his visa, Horrocks has to hire two US staff and lease office space for Carnival (which he's done, although he and Bunea prefer to camp out  at Time Warner).

The newbies will be charged with reeling in and managing clients, with the Wellington-based team continuing to be based in development.

Jobs continues to roll it. Following a tip from Wellington game developer Sidhe, Carnival has landed work on an app for Oreo cookies.

And an app was commissioned for DreamWorks' next major release, Rise of the Guardians (due later this year, and January in NZ).

By the end of this year, Carnival hopes to double staff numbers.

The company could be tempted by a takeover offer. "But we're young and have got a lot of time," says Horrocks.

How old are you, by the way?, NBR asks.

Twenty seven, Horrocks replies.