VoIP Provider, Vonage, Raises $35m

Voice over IP (VoIP) has been discussed for a long time, but has now reached a point where the quality of voice calls rival traditional phone networks. By converting the spoken voice in to data packets and transferring them over an IP network, phone calls to anywhere in the world can be made at a near-zero cost. A number of companies have packaged the equipment and infrastructure required in to easy to use and understand monthly-charge bundles. One of the highest profile is Vonage Inc, based in Edison, New Jersey, USA.

Today they announced that they had raised $35m in Series B Venture Capital funding, raising the total amount they have raised to $65.3m. This round was lead by New Enterprise Associates (NEA).

They currently have 70,000 lines in service and say they are adding 10,000 extra a month and plan to use the newly raised money to expanding their service, increase their marketing. Chief financial officer John Rego said he expects the company to become profitable by mid-2004.

Traditional telco’s will have a major problem with revenue, particularly on high margin International calls, if VoIP becomes the norm, as they will only be able to gain revenue by supplying the broadband connection that VoIP requires to function. Mobile phone operator income could also be threatened if VoIP phones, like Vocera that we reported on in October 2002, that work on wireless (WiFi) networks become widespread.

While bundling companies like Vonage currently make VoIP easy to adopt, their income is not guaranteed either. It is possible to connect directly to another VoIP user and other organisations such as Free World DialupĀ (FWD) provide interconnection services free of charge. Interestingly FWD has 75,000 users, exceeding the 70,000 that Vonage currently has.


New Enterprise Associates (NEA)

Free World Dialup