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Samsung, Sequoia invest in Israeli video-chat startup

Mobile video service Rounds raises $12 million, giving it a bit more ammunition to compete in the messaging app world.

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Rounds offers free, live video chat paired with interactive videos and games. Rounds

Rounds, a video-chat service, has gained a handful of major investors, bringing in Sequoia Capital and Samsung Ventures in its latest $12 million funding round, the startup said Wednesday.

The Israel-based company offers live video conferencing for up to 12 users on the same line and allows them to chat, play games and share photos or videos through its app, which is available globally for Apple's iOS and Google's Android mobile operating systems. Other free services, such as Google Hangouts, offer multiple-user video chats, but Rounds tries to differentiate itself by creating activities and games within its service. So far, Rounds said 94 percent of video calls on its app involve these interactive games or videos.

Rounds -- which has now raised a total of $22 million -- said it has 25 million users and no revenue so far. Those numbers make it a small player in the messaging-service space that includes WhatsApp's 700 million user base, as well as sizable user bases on Viber, WeChat, Line, Tango, Snapchat, Kik and Facebook Messenger. However, the interest from major venture-capital players like Sequoia and Samsung Ventures shows that there remains plenty of growth for messaging companies, big and small. Sequoia invested in WhatsApp early on and benefited enormously after the company was acquired by Facebook for $19 billion last year.

"We've been active in the mobile messaging space, watching the evolution of communication very closely," Shmil Levy, partner at Sequoia Capital Israel, said in a statement. "We believe the next generation is about instant video chatting and interactivity and this is exactly what we see in Rounds."

The privately held startup, founded in 2009, has 24 employees and plans to grow to 40 to 50 employees by year's end. It's previous funding round included investor Tim Draper, Verizon Ventures and Rhodium, which all contributed to the new funding round as well.

Dany Fishel, Rounds co-founder and CEO, said in an interview Wednesday that his company has been growing rapidly in recent months without having to spend any money on advertising. Going forward, the firm will continue to focus on learning about its users' behaviors and interests to improve the app, he added.

"I believe that in 2015 we'll be able to grow dramatically," Fishel said. "I do feel confident that we can put a good, decent fight to the big players of the day."