Waze Raises $25M to Turn Your Smartphone into a Traffic-Avoidance Tool

There are plenty of GPS-based smartphone apps these days that can give you turn-by-turn directions as you commute to work or drive to Grandma’s for the holidays. But there aren’t many that can tell you to get off at the next exit because an app user 10 minutes ahead of you got stuck in a traffic jam. In fact, there’s only one: Waze.

The four-year-old startup behind the app, which relocated its headquarters this summer from Tel Aviv, Israel, to Palo Alto, CA, calls the Waze system a “social mobile” application. Not only is the map data you see on Waze collected by users themselves, but if enough users have the free iPhone, Android, BlackBerry, Windows Mobile, or Symbian app running on their smartphones as they drive, Waze can assemble a live traffic map of a metropolitan region and send users advice about the quickest paths. Eventually, it might also be able to serve them highly targeted advertisements and discount offers based on their current locations or their customary routes.

“Our goal is to shave five minutes off your commute every day,” says CEO Noam Bardin. With 2.2 million people using Waze worldwide for an average of 300 minutes per month per user, the goal isn’t an unreasonable one. “Just like Yelp has become part of going out to eat and Groupon has become part of shopping, you’ll turn on Waze because we will give you the best route,” he predicts.

Waze on the iPhoneToday Waze announced that it has collected an impressive $25 million in Series B financing. (It’s the second big “up round” we’ve reported today—San Francisco-based Zendesk nabbed $19 million.) Blue Run Ventures, which also pitched in for Waze’s $12 million Series A round in 2008, led the new round for Waze, which was joined by existing investors Magma Venture Partners and Vertex Venture Capital. The big addition to Waze’s lineup of backers is strategic investor Qualcomm Ventures, a unit of the San Diego-based maker of communications chips for cell phones.

Waze passed the 1.5-million-user mark in September—only 20 months after the app debuted in Israel, and about 10 months after its U.S. launch, Bardin says. That was the event that attracted the attention of investors willing to put big bucks into Waze’s further expansion. “In the location segment, 1.5 million is the threshold—up to that point it’s just noise,” says Bardin, who previously co-founded Deltathree (NASDAQ: DDDC), a voice-over-Internet provider that went public in 1999. “So we got a tremendous amount of interest.”

Waze was “looking for strategic investors who could bring unique assets, and Qualcomm is a great example of that,” Bardin adds. The San Diego company is deeply involved in … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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