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Softbank-Backed Startup SmarTots Builds Facebook for Kids

A former Nokia Oyj (NOK1V) engineer is building a private social network in China where children share art projects online with parents or grandparents. Japan’s phone and Internet giant Softbank Corp. (9984) is betting he’ll succeed.

SmarTots, Jesper Lodahl’s Beijing-based startup, began offering mobile education applications for kids from two to seven through Apple Inc. (AAPL)’s China iTunes store in June. Designed as a game center for app developers, this month it’s adding functions to allow parents to “like” or comment on projects in a layout similar to Facebook Inc. (FB)’s site, Lodahl said.

Softbank, which provided funding, and Lodahl expect growth in smartphones and tablets to drive demand for educational services. Parents’ desire to set children apart from peers is likely to drive strong demand for any service in China that can offer an edge, said Duncan Clark, Beijing-based chairman of BDA China, which advises technology companies.

“People will pay a lot for their kid’s educations,” said Clark, who doesn’t work with SmarTots. “There is a lot of spending power around educational betterment.”

China smartphone shipments will more than double to 460 million units by 2017, researcher IDC forecast last month. The nation’s public expenditure on education reached 4 percent of its gross domestic product in 2012, according to data released at the National People’s Congress in March. Government spending on education has risen at an average annual rate of 22 percent in the past five years.

Source: SmarTots via Bloomberg

Jesper Lodahl, co-founder and chief executive officer of SmarTots, poses for a photograph outside the company's office in Beijing on March 26, 2013. Close

Jesper Lodahl, co-founder and chief executive officer of SmarTots, poses for a... Read More

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Source: SmarTots via Bloomberg

Jesper Lodahl, co-founder and chief executive officer of SmarTots, poses for a photograph outside the company's office in Beijing on March 26, 2013.

’Share to Mommy’

Started with $1 million in seed money in 2011, SmarTots in December won financing from SoftBank’s Pan-Asia Fund, managed by SoftBank Ventures Korea, a unit of Japan’s third-largest wireless carrier. The investment was about 2.15 billion won ($1.9 million), according to Mariko Osada, a spokeswoman for Tokyo-based Softbank.

Other SmarTots investors include Xu Xiaoping, co-founder of New Oriental Education and Technology Group; Angelvest; SOSVentures and ChinaRock Capital Management, Lodahl said.

SmarTots gives kids a way to “share to Mommy” the iPad creations that can be valuable memories, said Anna Lo, a partner who helps manage the $85 million Softbank Ventures Korea fund that backed SmarTots.

“Children are engaged with the devices and the content, but parents have no idea what they are doing,” Lo said in March 26 phone interview. “In old traditional forms, there were photo books and scrap books. In today’s digital age that is rapidly being replaced with mobile content stored on various digital devices.”

’Rok Out Concert’

SmarTots offers 33 education programs for children and has recorded 1.4 million downloads of its software to date, Lodahl said at his office in Beijing. The company targets 6 million downloads by the end of this year, he said.

Lodahl, a co-founder of SmarTots and chief executive officer, spent more than seven years at Nokia, where he helped develop four phones and create patents used on more than 1 billion handsets globally, he said.

SmarTots’ chief product officer and other co-founder is Victor Wong, with more than 15 years experience in web and educational software development. He was the founder of Speak2Me, an English-language learning social network in China that was acquired in 2007 by Lingo Media Corp. (LM)

SmarTots currently offers modified Chinese language versions of apps like “RokLienz: Rok Out Concert” by Creativity Inc. and the “iLuv Drawing” series of apps by MyVijan LLC Education.

Disney Advertising

“We provide an entry strategy for the China market for developers that haven’t localized their product for China and don’t have any marketing channels here,” Lodahl said.

Most of the apps are free and the company makes money through advertising to parents on the app. One early advertiser has been Walt Disney Co. (DIS), he said.

By June, the company plans to have an Android version of its software, which is currently limited to Apple devices, to help expand its user base in China before targeting South Korea and Japan, Lodahl said.

“We would like to help our invested companies gain access to these various regional markets,” Softbank’s Lo said.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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