Two weeks after laying off 30 percent of his employees, Jaxtr CEO Konstantin Guericke finds himself out of a job. He is being replaced by vice president of engineering Bahman Koohestani (former CTO at Cyworld and Orbitz), who will be acting as “interim” CEO.
Jaxtr offers VoIP calls to both your regular and mobile phone. Its last round was a $10 million Series B in June. Investors include Lehman Brothers Venture Capital (yup, they are still around), August Capital, Mangrove, Mayfield, DFJ, and angels Ron Conway and Reid Hoffman. (Guericke was part of the founding team at LinkedIn).
The company is obviously going through a rough time, but Koohestani still spins it as a “very healthy” business. He offers the following partial stats:
On average paying members go through $10 worth of jax calling credits in just nine days, leading to strong repeat purchase behavior where now 68 percent of our minutes are now paid for and we are seeing a strong commitment to purchase premium memberships. 43 percent of our new buyers opt for a premium membership. This is a predictable revenue stream, which is subscription-based.
That is great that such a high percentage of Jaxtr’s phone minutes are being paid for. The unanswered question, unfortunately, is whether the amount Jaxtr charges covers its costs.
That’s gotta be the shortest post I’ve sent so far on TC ;P
You never saw Arrington’s one word post? It read, “twitter”.
Obviously he hasn’t as implied by his use of the phrase “I’ve sent [sic] so far on TC”.
Wow, what is the backstory? I wonder why they didn’t give the CEO job to CMC.
Back story?
The company had absolutely no chance. It was basically a phone company, and search all my posts and you’ll see i say the same thing every time: it’s a scale business.
And these guys were about 5-6 orders of magnitude away from having scale to survive as a telco.
This wasn’t KG’s fault. No one could have helped this mess. And i can’t blame him for raising money on the concept. Shame of the VCs for being so ignorant with their investors money. Any sr person from any old school telco would have told them this company has no chance.
The “premium subscription” service they recently introduced smells like a board member decree. To me it smelled of fear, and the beginning of the death spiral for the company.
damn. a bit negative are we.
scratch that. sounds like bitterness.
And yet, offering more insight than you.
another one bites the dust
Based on Erick’s update, they’re acknowledging they’re a phone company, or more precisely, a reseller of minutes.
Now that’s a great business to be in!
Whoever did this deal should turn in their VC license.
Great comment Adolf! Love this ” Shame of the VCs for being so ignorant with their investors money.”
May be it is high time we lose a couple of irresponsible and badly run VCs on Sand Hill so the rest get into their senses, right?
I think it’s really important people understand how ignorant it was to think this company had a chance. Minute reselling is a very mature business with painfully miserable margins. The largest minutes reseller in the country has a mkt cap of about 100M.
Don’t blame the entrepreneurs for thinking they had a great idea. Blame a host of VCs who didn’t do even a cursory analysis to drill down on the company’s true core competency.
It would be like if I went in their and said i had this brilliant transportation aid that would ensure people get from pt A to pt B more quickly. A couple shakes of the hand while holding the device, and voila, my transport pace quickens immediately!
Welcome to Buggy Whip 2.0.
CMC is the man!
That’s sad to hear, Konstantin is a great guy. The economic crisis is surely leading towards a healthy clean-out in the startup business/Silicon Valley, but it’s sad to see friends losing their jobs.
From a VoIP startup’s perspective I am sure that some smaller companies will disappear and a few others will come out strong as it is a business that saves it’s users money. People look out to cut costs in time of recession and a VoIP company with a valid business model, good service offering and paying customers will be able to do both, save people money and be profitable.
Question:
What happens when a bunch of kids are asked to bring a return on investors’ millions?
In The Techcrunch world, this happens most of the time.
$15,000 initial investment is neato. But you gotta deliver. And most of the time, these kids, and their “me too” companies, end up as
roadkill.
Patent?
Whaaaaaaat do you mean somone else owns the IP rights????
hmm, a VP Engineering becoming CEO? Been there done that – not good.
Most likely you’ll now get the tail wagging the dog
Very interesting – Konstantin had a huge impact at LinkedIn, especially for the users. He was always seen as very approachable and as a customer advocate. I agree with Alex, questioning the new CEO’s background, and wonder why this happened (did Konstantin leave, or was he asked to leave… was it political, financial, etc.), and why the VP of Engineering is the best replacement.
Best wishes for Konstantin as he moves on to whatever the next thing is… the growth at Jaxtr was really impressive, and I’m sure he’ll do great at whatever that next thing might be (back to LinkedIn??).
Jason Alba
CEO – JibberJobber.com
He had no impact at LinkedIn.
The next thing for Konstantin?
You’re kidding, right?
Umm. I guess working the salad bar at Sizzler. But let’s not reach for the stars…
Hahahahahahaha.. i just pissed myself. give this man an emmy.
Nicely put Frederik! Just to clarify a few points here:
Konstantin’s role at jaxtr is changing from CEO to Chairman with the full blessing of the Board and executive team. He will still be involved with the company, and with the rest of us continues to be committed to our vision of enabling new conversations worldwide by linking every phone to the web.
We have a tremendous opportunity ahead of us. Skype barely scratched the surface as to what is possible when you deliver real savings and a good experience to the users. We are building on that momentum and providing such benefits to anyone with a mobile phone without requiring a download or headset.
I hate to disappoint the competitors here, but the game for jaxtr is far from over. We have just entered a new phase for the company, and are here to stay!
Visit our blog if interested in more info about this: http://jaxtr.blogspot.com
I’m not digin that.
- Scott from http://venturedig.com
“Twitter for entrepreneurs and venture capitalists”
The game might not be over. But Jaxtr is getting its ass kicked.
It’s the bottom of the 9th, and you just fired your manager.
Baseball fans can read the scoreboard without you telling us whether you’re winning or losing.
Konstantin Guericke is still the chairman at Jaxtr. Check his LinkedIn Profile http://www.link...e=&key=1244
What does that mean?
Focus on the game in front of you, Jaxtr.
Not the fans in the crowd.
konstantin is strong….so what he becomes chairman and so what its harder to get people to pay $$$$…jaxtr will end up being a part of something interesting
There will probably be alot more of this kind “transitioning” in the near future with the trouble economy.
Kevin
http://www.kidsdesk.net
i think skype does ok selling 150m per quarter of minutes. ioooo sorry its not a high margin business likes ads. but then again ads aren’t selling too well these days are they?
I’m with Jason. When Konstantin was in an executive role at LinkedIn he seemed to have an inexhaustible energy, combined with relentless patience, to respond to members’ issues and provide the most comprehensive answers he could on matters of policy and procedure. An example that shines like a beacon compared to the attitude that seems to prevail with that company today. I’ve had my differences of opinion with Konstantin but I respect him for his tenacity and his willingness to listen, engage and explain.
CMC should be promoted
None of us knows what really happened here, but the bottom line is that Konstantin has done a tremendous job at jaxtr. Not only did he take the company from a tiny 2-person startup to one of the hottest properties in the valley with millions of users and real revenues, but he also had the foresight to raise an extra $10M, that was not immediately needed , just 3 months before the funding environment froze. Jaxtr would likely be in very rough waters without these funds today. We will see how the Jaxtr story plays out, but Konstantin will certainly do very well in the future.
Hottest properties??
surely you jest–or hot means most likely to explode?
am I the only one with a man crush on CMC?
bjork’s stalker Ricardo Lopez called back from the grave. he wants his latent homosexual comments back.
wait and watch the game right?
http://www.iboozi.com
I was never an advocate for cheap minutes. The business is not viable and there is no real IP in the concept. Competition is too much to bite.
However when put to the business context as what 800PBX, RC, GotVMail have done, it would see immense potential.
Good luck Jaxtr. You need it all.
Seriously, why promote the VP of Engineering instead of CMC? Like his profile says, CMC co-founded eBay Express, a top 100 internet retailer. CHUNG is king!!!
CMC fan, you and I are like a peas in a pod
Because I’m CMC
I’m dyn-o-mite
CMC
And I’ll win the fight
CMC
I’m a powerload
CMC
Watch me explode!!!!!!!!!!!!!!!!!!!
Ebay should bring CMC back in and make him CEO of Skype!
Folks,
Cheap minutes will never work. I am pretty sure Jaxtr folks know the math. It’s fairly simple if they don’t understand. The cost per minute to run the servers and serve the minute is higher then 1 cent/min + there is a fixed (no matter how small) termination costs. Adding it all up, you got to sell millions of minutes to cover the founder/CEO’s salary let alone a team of staff members (developers, testers, network admins etc etc). Jaxtr was founded on wrong principle and the founders got a kick out of the launch thinking there are so many interested users (much like early days of skype or facebook) and these companies are worth billions so jaxtr must be worth millions at the least. Add that feeling with fat VC investment and you got a pretty good doze MJ here.
This is why wise entrepreneurs don’t start FREE business. The FREE part is left to collage (yet to) grads (Facebook, google, etc etc).
If I am missing something, please enlighten me with a math to suggest how many minutes do you need to sell (at what % profit) to make $1M dollar/year. It might help for me to understand how many simultaneous minutes does a server (Xeon or whatever) serve you and add the cost of running that server (assuming you have run and paid for server costs in your life). Basically, transcoding and playing various prompts is much more intensive then running web-application where a single server can server millions of users (literally) …
Oh! By the way, investors must have bought into the idea of “We have a clever algorithm that can serve 5000 simultaneous calls per $800 server” but that ain’t working with most tech guys like us who have played with this too long to be fooled
My 2 cents..
Parça Kontör
transcoding and playing various prompts is much more intensive then running web-application where a single server can server millions of users
thanks….
http://www.beymod.com.tr
beauty web has-been
))))
Not the fans in the crowd.
thanks uLan !