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Tile snags $3 million from Khosla Ventures to build a crowdsourced lost-and-found network

Tile, a company that sells a 37mm-by-37mm device that helps consumers find lost objects, has raised $3 million in additional funding from Khosla Ventures. This brings its total funding to $16 million.

Along with the funding, the company announced that it has sold its two-millionth Tile, a feat that’s no gimmick, since it’s backed by a solid app that manages them, and a dedicated network of users that relies on the devices. Tile launched two years ago with a fairly simple idea: It can help you find your keys, luggage, or whatever you attach the tag to, by communicating with your smartphone via Bluetooth.

Because of the way a Bluetooth radio works, a Tile can only communicate with a phone when the two are in close proximity of each other — Tile says 100 feet. So if you lost your keys in your house, the Tile might help you find them, but out on the streets, you’d have to be generally near the object before the app would know it was nearby.

This leads to the second attribute of Tile that’s designed to help people find their stuff. For instance, if you mark your keys as “lost” on the app, other Tile users’ apps will begin looking for it, effectively turning the thousands of other users into a radio network canvasing for your valuables. If their phone detects the lost object, it sends the location to you via your app, without the finding phone’s owner having to do anything. Basically, Tile is attempting to build a crowdsourced location-tracking network for your stuff.

Two years ago, during the Tile’s crowdfudning campaign, which raised $2.7 million, current Tile CEO Mike Farley explained to me that he could envision a network of Bluetooth radios that did away with much of the need for a more expensive and battery-sucking GPS-based tracker. But to make that vision a reality, Tile needed users. Farley declined to give user numbers, but he did say that the most popular Tile package is a four-pack of the devices, which could put their user base at about half a million people. In San Francisco and Manhattan the Tile network is so dense, Farley says, you can’t go a block without encountering a Tile user.

But even in cases places where the users are more spread out, the system still works — although it may take a lot longer to find a lost item. Farley gave an example of a user in Brussels who had his VW bus stolen outside a restaurant. Even though there was a Tile inside the bus, Farley says the owner was dubious about its ability to help him. A week after he marked the bus “lost” on the Tile app, however, a Tile user in Amsterdam walked near the bus, triggering an alert. the bus’s owner sent the Tile screenshot to the Amsterdam police who helped return the bus to the owner.

Another example includes detecting lost luggage in Florida, though it took two months for a Tile user’s phone to discover it. The hope is that as more users come onboard, the detection time will decrease naturally, though careful thieves could still pick up a wallet and dump the Tile inside, if they wanted. Also, the lost-and-found success rate also depends on law enforcement (or other people at the scene) trusting the evidence found in an app.

But the biggest challenge for Tile’s missing goods network, outside of growing its user base, is that there are dozens of companies building products that also communicate with your smart phone. StickNFind and Lupo are some. As these other devices come online, Tile hopes to become a platform for companies adding connectivity to their products, so if they are lost, they will show up on Tile’s app and network.

Farley didn’t disclose where he plans to take the company, but I would imagine that he’s working his way into other industries that could use the service. For example, talks with the auto industry to get remote key fobs on the Tile app, could prove fruitful. Or why not take the VW bus example further, and pop an inexpensive, Bluetooth radio into a car, so it can use the Tile network to phone home, without the expense of going over the cellular network?

If that’s the case, the biggest competition for Tile isn’t me-too products entering the market, but companies that could use their existing market penetration to build competing peer-to-peer lost and found networks. That could make rivals out of OS makers like Google and Apple. Likewise for mobile carriers that can get their software into millions of phones. Then again, by the time they get started thinking about this opportunity, it may make more sense to just buy Tile.

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Update: This story was corrected to reflect that Khosla investment partner Keith Rabois is not joining the Tile board.