Lunar Aims to Offer Budget Phone Service, Premium User Experience

Most of us can’t imagine going back to a time without smartphones. Having an Internet-enabled phone on one’s person makes life easier, and many of us would feel a bit naked without one. Paying for them, however, is another matter. The prices keep going up as the phones get more sophisticated, and with myriad fees tacked on, the monthly bills are increasingly complicated. If you’re like me, you grumble, set up autopay, and avoid thinking too much about it.

A Detroit-based telecom startup called Lunar Wireless is seeking revolutionize the way people communicate with an on-demand, pay-for-what-you-want data plan—no monthly fees or contract required. The company launched nationally late last week armed with $4.1 million in seed funding and the desire to offer a budget phone service with a premium user experience.

A few years ago, when Lunar co-founder and CEO Hunter Rosenblume was still an undergraduate at the Georgia Institute of Technology, he hit the hackathon circuit, hoping to win cash prizes that would help fund his education. At one of these hackathons, he met co-founder Rohith Varanasi, who had recently dropped out of high school to develop software allowing users to make phone calls over the Internet. Both soon discovered that they were massive “phone nerds,” says Rosenblume.

Not long after they met, the pair started a company in New York. They eventually came across an article that said 40 percent of Detroiters didn’t have Internet access. After doing some research, they found that Detroit was far from the only large American city with an abysmal rate of connectivity. This discovery sparked an idea: cheap Internet access through a full-service wireless carrier with no monthly fees or contract that allowed people to pay for data in small increments.

In 2014, as that idea was germinating, Rosenblume and Varanasi moved Detroit to interview potential customers and solidify their startup. During that process, the pair applied and were accepted into the Techstars Mobility program. (Although Lunar isn’t a traditional mobility company, Rosenblume says Techstars Mobility and one of its partners, Verizon, found the company’s idea appealing enough to give Lunar a shot in the summer incubator.) After finishing Techstars, Lunar relocated permanently to Detroit. Today, the company’s nine full-time employees are based in the Eastern Market neighborhood.

“Detroit was the first place I felt like I could breathe,” Rosenblume says. “People here are really committed to what they’re working on.”

The key to Lunar’s service is taking apps offline. Thirty percent of a phone’s data is taken up by apps running in the background, Rosenblume says, often without the user’s knowledge. Lunar’s proprietary technology stops the phone’s background traffic until the user opts in or the phone connects to a wireless network. Instead of tracking data usage per gigabyte, customers instead pay by the day for the data they want. It costs 25 cents per day per app for unlimited 4G data; apps used offline or on WiFi are free. Outbound calls and texts are also 25 cents per day. Incoming calls and texts are free, as is data from push notifications.

“We’re not charging less, we’re just letting people pay for what they need,” Rosenblume says. “With most carriers, you buy data for the whole month and hope you use it all.”

Lunar’s technology only works on phones purchased from the company’s website, and prices range from $99 for the Blu S1 (which Rosenblume describes as the company’s “freaking gorgeous” flagship phone) to $599.99 for the Google Pixel. The phones are shipped directly from the factory and come loaded with the Lunar SIM card and app. The customer can choose to keep their old phone number with a one-click online transfer process, or get a new number.

Rosenblume says the company is able to offer lower prices than some competitors because hardware makers ship phones directly to customers, rather than having to go through a third-party wireless carrier. It costs Lunar roughly $30 to acquire each customer while the major carriers pay closer to $330, he says. He also says the average monthly bill for Lunar users is $15. The highest monthly bill he’s seen so far has been $48, he adds, compared to $148 for the average smartphone user.

After making friends with local Cricket wireless stores and interviewing thousands of potential customers, Lunar tested its system across Michigan through pilot projects. Before the company signed deals with various wireless carriers, Rosenblume says he and Varanasi had to buy hundreds of phones from these friendly local stores and hack them with Lunar’s technology before selling them.

Rosenblume says Lunar has no direct competitors and feels its product is “totally unique to the marketplace.” He says Freedompop, a company out of Los Angeles, comes the closest, but most of its plans still require a monthly fee.

If you think Lunar sounds like a bit of a moonshot, consider its backers. In 2016, the company was awarded a $100,000 fellowship by investor Peter Thiel’s foundation, which pays innovative young people to drop out of college and work on their entrepreneurial projects. Earlier this year, Lunar raised a $4.1 million seed round led by the Bay Area’s 8VC. Other investors include Betaworks, Blu Products, Fontinalis Partners, 1517 Fund, WNDRCO, Detroit Venture Partners, Core Innovation Capital, Abstract Ventures, Expansion VC, Social Starts, and a few angel investors.

Rosenblume seems especially excited about Lunar’s relationship with Betaworks. Peter Rojas, one of the firm’s partners, was a founder of Engadget and Gizmodo—publications that Rosenblume read breathlessly in his younger years. In a quote included in Lunar’s press release, Rojas said the company is one of the “most exciting” he’s ever come across, and his firm’s investment in Lunar is one of its largest to date.

“It’s so cool to be able to work with my heroes,” Rosenblume says.

Sarah Schmid Stevenson is the Custom Content Editor for Xconomy Insight. You can reach her at sschmid@xconomy.com. Follow @Xconomy

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