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Want Privacy Online? Start-Ups Bet Users Are Ready to Pay

Photo illustration of kids using WhatsApp. Henning Kaiser / AP file

You know your personal information is valuable, but are you willing to pay to keep it private?

A growing number of start-ups think so, and many are betting consumers will pay at least something to keep their data away from prying eyes.

Surveillance and online privacy are a big topic of conversation at South by Southwest Interactive (SXSWi) this year. Among the speakers addressing the topic will be WikiLeaks founder Julian Assange and fugitive NSA whistleblower Edward Snowden, who will speak live via video stream.

"The next generation of start-ups, those in the next 10 years that will survive, will be the ones that put security first," said Nico Wells, CEO of encrypted messaging app Wickr.

Wells' company uses military-grade encryption technology to send text, photos and even videos between users, and has no access to the messages sent.

"The benefits of the Internet have been proven and privacy is in demand and people are willing to pay."

The company now sends a million messages a day across 190 countries since its launch almost two years ago, Wells said. On Monday, the company announced it had raised $9 million in Series A funding from Alsop Louie Partners and other investors.

Since Facebook's acquisition of WhatsApp, the company has seen a 600 percent jump in the number of people who sign up each day to use its app.

"When Whatsapp first launched, you didn't have hackers targeting messaging apps daily. Now you do," Wells said. "I think this kind of messaging will be bigger than Skype."

Revelations about the extent of the NSA's spying and the apparent explosion of company security breaches are awakening people to the fact that their conversations and personal information are vulnerable, said Howard Lerman, co-founder and chairman of Confide, a private messaging start-up.

Confide's mobile app, which launched in January, has a feature where all the words in a sent message are blocked out. The recipient can only view one word at a time, and when the user scrolls to the next word, the previous one disappears for good. The feature helps make screenshots difficult and keeps the conversation generally hidden from peering eyes.

"The next generation of start-ups, those in the next 10 years that will survive, will be the ones that put security first."

Lerman, who is also the CEO of the geomarketing company Yext, said that while the app is open to anyone on iOS (the app has not launched on Android), the company's target users are business professionals.

"We plan to capitalize on what we see as a massive opportunity to provide a way to communicate that doesn't put your conversations on this massive permanent record," Lerman said. "We are optimized for professionals. I think CEOs will use this to have more efficient conversations with their executive teams."

Both Wickr and Confide are free to download and use, but both companies plan on charging for more premium services in the future. And they expect to see a demand for paid services.

"Providing a service for a small price, I don't think this business model would have worked 10 years ago," Wells said. "But now the benefits of the Internet have been proven and privacy is in demand and people are willing to pay," she added.