It has just raised Series C round of $30 million,adding to the earlier rounds of $6 Million(Series A) and $10 Million(Series B) and making the total investment in this 2 years old startup to whopping $46 Million.For those who haven’t heard of this service before,it basically allows people to ask any question in conversational English and receive an accurate(what they claim) answer as a text message using any mobile phone,from a basic flip phone to advanced Smartphones such as iPhone.
TechCrunch,a notable tech blog in Silicon valley has manytimes blogged about its updates and progress and has mostly discouraged it for having a ‘dumb concept’ as their backbone.ChaCha uses real time humans at the back-end to answer queries coming mostly from the users on the go(using a mobile phone).”Human powered” is something that hits TC the most and forces them to declare it an ‘unscalable’ and ‘dumb’ idea.
Logically,if ChaCha’s usage keeps on increasing,then there will be a time when “human powered” system would really turn impractical and will simply collapse.Taking this thought into consideration,TechCrunch seems quite right in their ideology.
But let’s look at the situation a bit differently.We all know,how badly VC fraternity is terrified of doing any further investment in startup industry,an industry,which by nature is quite volatile and unpredictable (especially these days).Startups have trimmed down their staff,just to sail through the tough times and funding is probably the sweetest thing that can happen to startup folks these days.And bad economy has been persisting(rather worsening) for the past two years.
Now,within these two troubled years,ChaCha has been fairly successful in securing big rounds of funding.Every round went one step ahead of the earlier one.(Series A : $6Mn,Series B : $10 Mn,Series C : $30 Mn ).And one must remember that Investment reflects three major things about any ‘funded’ startup : “Burning rate”,”ROI” and “Future Scope”.
Observing the investors(Jeff Bezos,Bezos Expeditions,Morton Meyerson & 21st Century Technology Fund) involved and the incremental trend of investment in ChaCha,it seems that the ChaCha’s burning rate is definitely high but the ROI and Scope is also brighter than before.
Folks behind ChaCha might possibly be having some plans to scale their business model up.For instance,they might do some tie-ups within mobile industry or may turn the service partly paid at some later stage.Every such round of funding is reaffirming the growth of ChaCha and is also proving TechCrunch’s claims to be ‘dumb’.
So,after looking at both the possibilities,one can’t clearly decide who is ‘dumb’ here.It’s better to wait and watch !