Swype Raises $5.6M, Looks to Go Global with Text Input Software for Smartphones

12/15/09Follow @gthuang

Seattle-based Swype, a maker of text-input software for touch screens, has raised $5.6 million in Series B equity financing from new investors Samsung Ventures and Nokia Growth Partners, and returning investor Benaroya Capital. The funding should help Swype expand its technology to more mobile phones around the world, and eventually explore other types of devices as well.

This is one of the larger second-round tech deals we’ve seen in Seattle lately, and it is encouraging news for Swype. The company raised $1.3 million back in April, and just this month released its first product, on the Samsung Omnia II smartphone. The significance of the new funding, which the company hopes is the last round it will need, is that Swype now has two of the world’s largest mobile phone manufacturers supporting its technology—and could be poised for mass-market adoption.

Sort of like with “The Matrix,” nobody can tell you what Swype is—you have to try it for yourself to fully appreciate it. So I recently visited the company’s office in Seattle’s Fremont neighborhood to play around with its mobile interface. The basic idea is that instead of using your thumbs, or touch-typing like on a full-size keyboard, you drag your finger from letter to letter, picking it up between words, and the software figures out lightning-fast what you’re typing, on a word-by-word basis (even if you’re a little sloppy). It’s based on the relative likelihood of words—you’re more likely to type “this” than “thus,” for instance—and the program adapts to how often you actually type each word.

Swype’s chief operating officer, Aaron Sheedy, says that if you show Swype to anyone under 25, they immediately pick up the phone and start working it with one hand. Me, not so much. I could almost feel my neurons rewiring as I struggled to connect one letter to the next; one way to describe it is that I’m not used to typing serially, I do it more in parallel. But Sheedy says most new users get up to “high-level productivity speeds” of typing 30 words per minute or more within just a few days.

Sheedy says that the new funds will be used to advance the company’s “deployment of software in the market—more languages, more operating systems, more devices. So Swype can really be a global input mechanism for touch screens,” with the primary focus being on mobile phones first. That’s before it branches out into things like GPS units, tablet computers, TVs, and video game consoles. “We need to get out there on a billion devices,” he says.

Swype makes money through per-device software licenses on phones. That means original equipment manufacturers (OEMs) pay the company a royalty every time a Swype device is shipped. I asked Sheedy whether the company is talking with Apple’s iPhone teams. “We’re talking to everyone,” he says. “We’re very close with a couple other big OEMs. It’s fair enough to state that Apple does have a strong sense of their ability in the touch screen space.” (It’s also probably fair to say Apple views Swype being on Samsung phones as a competitive threat, so it may be less likely to make a deal with the startup anytime soon.)

Strategically, having Samsung’s and Nokia’s venture groups involved makes good sense for Swype. “There aren’t any information rights as part of this. They can counterbalance each other and serve other OEMs,” Sheedy says. “We don’t want to be seen as only serving the market for those two guys, though we certainly support them as partners.”

With the costs of touch screens coming down—and the fact that they give a device a larger, more robust interface with fewer moving parts—it sounds like a promising market to tap into. Sheedy says Samsung expects more than half of its phones to have touch screens soon, while he says another large handset manufacturer has said its fraction could be as high as 80 percent.

In the next year, look for Swype to come out on Android devices and at least two other operating systems, Sheedy says. Already underway is an expansion into Europe, where he says the company is “effectively done” with most languages. Then it will be on to China and other Asian countries where Swype can make faster phonetic-based (pinyin) systems to compete with graffiti-based (strokes) text input on phones. “We’ll help increase the penetration of touch screen phones in China, by solving the text input problem they have,” he predicts.

Swype was co-founded in 2002 by Cliff Kushler and Randy Marsden, and is led by CEO Mike McSherry. The company now has 20 employees and is hiring for several open positions on the engineering side, according to Sheedy. “Our ability to close deals [with manufacturers] is more gated by our inability to serve them than by lack of interest,” he says.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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