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August 27, 2004
Holy jump'n frogs, Vonage gets $105M!
Vonage picked up $105M today from NEA, 3i and Meritech making the total $208M they have raised! Well I made a prediction a couple months ago that Vonage was going to be roadkill. My contention is that the people who control the pipes to the home are the ones who will monitize those pipes to the greatest extent. That means no Vonage, no separate billing relationship for VOIP. On the one hand you could say this funding proves me wrong. On the other, you could say it proves me right. Investors are scared. They want to gaurantee success, so they plow a huge pile of money into Vonage to make sure no-one can catch them. Eventually someone will buy it. I can understand that strategy. But the bar has been raised to a nose-bleeding level. While the post money valuation was not disclosed, you have got to assume it is somewhere between $300-$400M. That means for these investors to make any money you have got to sell the thing for over $500M! I don't see that happening any time soon. NEA has got to be praying for another IPO window!
Posted by Martin at August 27, 2004 11:49 AM
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Lord have mercy,
A voice of sanity on VOIP! Vonage (hey, it rhymes with mirage), Skype, etc., all potential buyout targets for the incumbents. Thanks for the reality check.
Cheers,
Douglass Turner
Posted by: Douglass Turner at August 31, 2004 8:13 AM
Another factor is that the encumbents have greater control over the Quality of Service delivered over those pipes. As cable companies begin to roll out QoS-enabling solutions closer to the edge of their networks, they can enable business or first-class travel for their VoIP customers through their networks.
Vonage? Relegated to "best efforts" packet delivery over a congested, shared, cable pipe.
Posted by: Scott Miller at August 31, 2004 8:36 AM
Being a cellular industry guy, we have a axiom that is the normal response to any inquiry regarding wireless usurping the wired POTs line, and that is, "Not in the forseeable future". Why this cautionary retort? Because in America we have the most reliable wire telephony system in the world. I'd chance that everybody on this blog can't recall the last time one of you picked up your wired phone and didn't get dial tone. This is a tough bar to rise to and the wireless world is far from being in the same league. Which brings me to the relevence related to this post. Is VoIP ready to compete with this standard? I think this is the real question of survival for these guys. I'll trust you VC's on the details of how you hatch and nurture this potential revolutionary technology, but to the rank and file customer, the reliability factor is make or break.
Sorry to say, I am skeptical. I switched to an altenate LEC (cable company) when competition broke out for my local service here in Atlanta and it didn't take long to experience an outage. Relying on your internet conectivity (Ask youself how often that goes out on you?) for something as vital as phone service just seems risky. If the tech bugs are all worked out as the Vonage's of the world say they are, they need to go and convince the potential customer base of this first and foremost.
My good friend and neighbor is making the switch to Vonage this week against my advice so I'll get to see first hand how it all goes. I'll let you know how it works out.
Posted by: Tony Alva at September 1, 2004 7:56 AM
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