A Year In The Life Of An $85 Million Startup, GroupMe

groupme jared steve

Today, GroupMe celebrated its first birthday.

The group text messaging app has had quite the year.

From a lawsuit, to major competitors, to raising $11 million, the founders have had serious highs and lows.

We talked to cofounders Steve Martocci and Jared Hecht who told us all about the hectic first year.

May 2010: Jared Hecht and Steve Martocci create GroupMe at a hackathon.

GroupMe was the product of a TechCrunch hackathon, and it was originally called Grouply.

'Jared said, 'How do we make going to music festivals better?' His girlfriend hated email chains because they never worked at concerts; they broke down once you got there,' says Martocci.

'We had a working prototype in 24 hours and took it out to a festival the next week in Colorado for a concert…and it worked.'

The pair then debuted the app at the hackathon.

June 2010: Investors start sniffing around the app. Gilt Groupe's Kevin Ryan offers to lead a round of financing.

At first, Hecht and Martocci stayed at their day jobs. Martocci was a Gilt Groupe employee and built GroupMe in his spare time.

In June, they started getting a lot of investor interest. They gave their bosses a heads up, and Gilt Groupe's CEO Kevin Ryan was prepared to lead a round of financing.

Instead, Martocci and Hecht went in a different direction.

July 2010: Hecht and Martocci leave their jobs and take a real stab at GroupMe

Martocci and Hecht accepted a loan from Hecht's parents to keep their app afloat.

On July 1, they quit their jobs to pursue GroupMe full time.

It wasn't easy though. Competitors, like Fast Society, quickly emerged.

'We were getting attacked from the bottom (small companies),' Hecht recalls. 'People were literally taking the exact copy we had for SMS flows and coining them as unique features.'

August 2010: Hecht and Martocci announce an $850,000 round and change the company's name to GroupMe

In August, Hecht and Martocci raised enough money to pay back Hecht's parents and hire their first three employees.

They announced an $850,000 seed round from Lerer Ventures, Betaworks and SV Angel. Martocci and Hecht also changed the company's name from Grouply to GroupMe.

September 2010: GroupMe launches its beta at TechCrunch Disrupt and reaches the 1-million-message mark. A near death experience makes Martocci realise how valuable his product is.

October 2010: GroupMe starts distributing 100,000 texts per day and the first iPhone app becomes available. Bible studies and grandmas begin using the app.

After Disrupt, Martocci and Hecht put their heads down and went back to work.

They released the first version of the iPhone app in the App Store; the initial users surprised the founders.

'We realised we were onto something much bigger than we originally intended,' says Hecht. 'We saw some extraordinary use cases, like bible study groups, people doing neighbourhood watch groups, and people rallying around patients in hospitals.

'GroupMe was fulfilling a very serious void in the landscape of social. In this age of broadcast overload, we were really lacking was something that helped us manage a real-life network with people who are important to you. That was the landscape we stumbled upon.'

November 2010: GroupMe releases an Android app and continues to grow internally.

On November 15, GroupMe released the first version of its Android app to the Android Market.

Hecht and Martocci continued to hit the pavement hard and hired more people who shared their vision.

December 2010: 450,000 texts are sent per day and GroupMe starts raising a Series B round.

In just two months, GroupMe's sent messages grew from 100,000 per day to 450,000.

Investors were excited about the metrics; Martocci and Hecht began speaking with them about a fresh round of funding.

January 2011: GroupMe raises $10.6 million.

Martocci and Hecht started out the new year with a bang. In January 2011, GroupMe announced a $10.6 million Series B round of financing from a list of all star investors like Khosla Ventures, General Catalyst Partners and First Round Capital.

With its fresh cash, GroupMe continued its hiring binge.

'We were able to take that momentum and really leverage it going into the new year,' says Hecht. 'In January and February we continued to hire what we think is the best team in New York City-- the best team period. We have incredibly talented people from the engineering side and from the client side.'

February 2011: GroupMe now sends one million messages per day.

GroupMe kept up its trend of doubling its numbers every two months.

In February, the company crossed the one-million-messages-per-day mark.

On February 25, GroupMe released the beta version of its BlackBerry app.

March 2011: At SXSW, sh*t hits the fan.

Like Twitter and Foursquare before, GroupMe stole the show at SXSW.

'We went to South by Southwest and sh*t hit the fan,' says Martocci. 'It was really awesome. We were able to launch GroupMe 2.0, then go down to Austin and see thousands of people use it in the wild.'

More than 2 million messages were sent to various South by Southwest groups during the festival, and GroupMe won the Breakout Digital Trend Award.

One week after SXSW, GroupMe announced partnerships with major brands like Bonaroo, Bon Jovi, MTV and Oxygen.

April 2011: GroupMe now sends 2 million messages per day.

In September, GroupMe celebrated sending one million messages in aggregate.

Seven months later, it sent 2 million messages per day.

May 2011: GroupMe makes its first acquisition

On May 5, GroupMe made its first acquisition.

'We acquired a company called Sensobi which worked on a Blackberry CRM. Its tag line was 'turning contacts into relationships,' which resonated really well with us,' says Hecht.

'GroupMe needs to be a cross platform; it has to work for everyone, everywhere, all the time. Andy Chung was the lead blackberry engineer over there; he is the best in the game and the acquisition shows our commitment to developing across all platforms and being acceptable to everybody.'

Later that month, GroupMe opened up its API to developers.

June 2011: GroupMe sends 100 million messages per month. It also faces its first lawsuit and Apple becomes a competitor.

GroupMe sent more than 100 million messages in June.

But like any startup, GroupMe had problems. In June, the startup was sued for allegedly spamming users.

In addition, Apple announced a new messaging service was eerily similar to GroupMe: iMessage.

Martocci and Hecht claim they weren't rattled.

'We realised about six months in that we would get attacked from the top, meaning the Facebooks, Apples, and Googles of the world,' says Hecht. 'We were anticipating it, and in many ways it is a validation of what we're building.'

July 2011: Google becomes a competitor with the launch of Google+.

GroupMe continued to expand across all platforms.

On July 13, GroupMe released the preview version of Windows Phone 7 to the Windows Phone Marketplace.

Another 'top' competitor emerged in July: Google+.

Hecht thinks GroupMe can take on Goliath. 'If you look at the product from a competitive standpoint, we're focusing on real world use cases that compliment how you interact with people,' says Hecht. 'We're in a very unique space that everybody wants a piece of. We've done a good job cutting through the noise.'

Present: GroupMe turns one with millions of users in 90 countries, and gets acquired for $85 million by Skype.

Last week, GroupMe celebrated its first anniversary.

Yesterday, it announced that it was being acquired for $85 million by Skype.

It will continue to operate independently out of New York.

'We think there's a whole 'nother year of stuff to do, we're excited,' says Hecht of what's to come.

'Double the fun!' says Martocci.

As for raising more money, 'We're just taking things as they come,' says Hecht. 'We've got a great roadmap ahead of us and a great hiring plan. We're continuing to move full steam ahead.'

Hecht and Martocci have had serious highs and lows throughout their first year, but they're more excited than ever about GroupMe.

We asked each founder what their highest and lowest moments have been.

'My high point and low point is the same,' says Hecht. 'It comes rather frequently when I walk home from work, open my front door, grab my keys, then realise the keys I grabbed are my office keys. It makes me smile but it makes me sad because it shows how much GroupMe has become a part of my life.'

'Seeing GroupMe in the field is the high point,' says Martocci. 'I wear my GroupMe had and people come up to say 'we're using it right now!' That's my favourite -- just to see it happen.'

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.