Stockholm's Truecaller raises $18M, brings its smart caller ID and reverse lookup service stateside

By Michael Carney , written on February 6, 2014

From The News Desk

Most of us loathe receiving a call from an unknown number. Do you answer it? Is it important? An old friend? A telemarketer? How about that area code? It looks familiar, but where’s it from? The uncertainty and anxiety of this situation seems like it should have been left behind a decade ago. So why in the age of information at our fingertips must we still deal with unknown numbers?

Truecaller is a four-year-old Stockholm-based startup dedicated to solving this problem. When the company launched  in  2009 it was a pre-app world, meaning the product was available only for Symbian and Windows Mobile. Truecaller’s founders posted a link to the product on a consumer forum and saw it cross 10,000 downloads within a week. They knew they were onto something.

Today, after doubling the user base for its crowdsourced address book product to more than 45 million users in the last six months, Truecaller announced an $18.8M in a Series B round of financing led by Sequoia Capital with participation from existing investors Open Ocean, Truecaller Chairman Stefan Lennhammer, and others.

Somewhere between 6 and 8 billion phone numbers are active worldwide at any given time. Changing records and duplicate names make the problem of caller ID thorny. Truecaller relies on crowdsourcing, using address books voluntarily uploaded by consumers, combined with existing yellow pages and white pages directories.

The company uses a proprietary social graphing technology to clean and structure this data and map likely connections between users of the app. For example, at an overly simplistic level, if two users share several address book connections and both have records for a John Smith, but with different phone numbers, there’s a high probability that these are just multiple numbers for the same Smith. The database contains nearly 1 billion verified phone numbers.

The company also maintains a crowdsourced database of the most prolific phone spammers and helps block these numbers for its users, blocking more than 1 billion such unwanted calls last year. Like any service, however, the company is powerless against blocked calls. and since call blocking is a revenue source for phone companies, it's unclear if it will be able to develop a viable solution.

For Android, Blackberry, and Symbian users, TrueCaller runs in the background and offers what it calls “Live Caller ID,” giving users the option to see the identity and location of (most) inbound callers, as well as how many shared social connections they have in common and a “spam score’ rating. iOS and Windows Phone users are limited to reverse lookup and call blocking due to operating system-level restrictions. The company’s reverse lookup service is also available the Web and via internet-connected feature phones.

While Truecaller has been available for download globally, the company has found the most success thus far in India. “Truecaller is among the most engaging applications in many high growth smartphone markets” says Sequoia partner and Truecaller board member Shailesh Lakhani.

The company hasn’t focused on the US, but with new funding in hand, CEO Alan Mamedi aims to change that. The company is opening San Francisco operations that will include both business development and engineering teams. As a first step toward this market expansion, the company is announcing updated versions of its iOS and Android apps that feature the integration of Yelp’s data API allowing users to better identify millions of reviewed businesses globally.

Truecaller maintains a similar partnership with Twitter, which initially rolled out in India to allow users in that market to find a user’s Twitter handle based on their phone number. No word on whether or when similar functionality will come to the US market, but the integration at least shows what sorts of services are possible given Truecaller’s extensive contacts database.

When contact data is being shared, there are obvious privacy questions involved – concerns that can register differently in different global markets. Truecaller attempts to address this by allowing individual users to opt-out from being listed in its directory, although many would argue that this should be an opt-in service. The company also does not give out contact info for users based solely on a name search. For example, if I were to search Mark Zuckerberg, I would get the option to contact Zuck through the app and request that he share his contact details. Zuck would receive an app push notification and/or a text message, depending on his settings, and have the option to approve or decline the sharing, as well as block me from making future requests.

Truecaller has already been the victim of a hacking attack courtesy of the Syrian Electronic Army, which resulted in a brief shutdown of its website but allegedly no loss of user data. Incidents like this highlight the risks of uploading your address book data to third-party platforms and will give consumers reason for concern.

It is a freemium product that offers the option of an ad-supported free download and an ad-free premium version that also includes advanced features available by monthly subscription. The company also monetizes by licensing its data API to third-party developers.

Phone calls may seem like a dying medium in the era of social media and mobile messaging, but Mamedi, the company’s CEO, says Truecaller is adding 1 million new users per week, a rate which he hopes to double in the near term. His ultimate goal is to cross the 200 million user mark by the end of 2014.

“People still make phone calls and they still get spam,” he says. “Many chat conversations are authenticated based on the users’ phone numbers, making reverse lookup as relevant as ever.”

The company faces a number of challenges beyond the shift in communication channels. First and foremost is trust. It took Truecaller more than a year to gain the trust of the Indian market, Mamedi says. It could take at least as long to do so in the US, particularly given the current climate and headlines around privacy.

Beyond that, the company is facing increased competition from Google and others. The current top-of-the-line Android and Nexus devices feature smart caller ID that leverages Google+ and Google Maps data. In a world where Google aims to “organize the world’s information” it’s hard to imagine this competition won’t intensify. Places data companies like Factual and Locu (acquired by GoDaddy) serve a similar function in the business market and license this data to anyone willing to pay for it. But only Truecaller has users voluntarily reporting spam callers, making that feature its ace in the hole.

Identity is a precious commodity. By monetizing this fact, Truecaller must walk a fine line between unmasking the bad guys, alerting users to calls from unknown but friendly parties, and breaching user privacy. If the company can walk this tightrope effectively, it stands to be rewarded handsomely. If it errs to either side, it could be a long, swift fall.