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Summary:

Venture dollars continue to flow into the Voice-over-IP start-ups. The latest company to raise big dollars is Blue Note Networks of Tewksbury, Massachussets. The VoIP software company snagged $15 million in series B funding from Commonwealth Capital and existing investors Fidelity Ventures and North Bridge Venture […]

Venture dollars continue to flow into the Voice-over-IP start-ups. The latest company to raise big dollars is Blue Note Networks of Tewksbury, Massachussets. The VoIP software company snagged $15 million in series B funding from Commonwealth Capital and existing investors Fidelity Ventures and North Bridge Venture Partners.

Las week, TelTel, a Santa Clara-based start-up that hopes to become the SIP-based Skype-type service provider raised $8.8 million in Series A venture capital from no-name investors such as Purple Communications, Acorn Angels and Parawin Venture Capital. With over 1.5 million registered users and partnerships with service providers worldwide, TelTel claims it is the world’s largest SIP-based Internet telephony user community.

A few days ago I wrote about Tello, a company co-founded by Jeff Pulver, which had raised $5.5 million from the likes of Craig McCaw and former Apple CEO John Sculley. Michael Robertson, the founder of MP3.com recently snagged $6 million in funding from Dawntreader Ventures.

The murky regulatory scenario, and the ultra-crowded landscape makes investing in VoIP start-ups clearly risky. Sure Skype managed to get $4.1 billion from eBay, but that’s a one-off deal, much like Yahoo buying Broadcast.com. Barring the Skype-sale, the exits in the VoIP sector have been few and far between. For instance, the only VoIP IPO, CBeyond is trading below its offering price of $12 a share.

Many industry insiders believe that the Vonage IPO and its after-offering performance will determine the future of VoIP, at least from a financial perspective. A bad IPO could chill the new investments in the entire segment. Nevertheless, the immense potential of VoIP as a transformative technology, continues to lure the VC investors.

  1. Om,

    You’re right – anyone investing in VOIP plays at the moment shouldn’t be expecting a skype-style exit. But there IS a fair amount of money to be made out of execution – its still early days yet in the VOIP world.

    I’d also argue that Skype was never a VOIP play in the usual sense, but I’ll save the details for some other time …

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  2. How can anyone invest in VOIP until the Net Neutrality issue is thrashed out? Ok, let’s modify that thought – here are the business plans that will work given our current trends:

    1) Target customer is AT&T, and the technology under development is assured to give AT&T additional revenue over anything it can develop in house.

    2) same as above, except put in the name of your favorite cable monopoly, but show that down the road, if AT&t snaps up the cable’s, your technology still is superior.

    3) Your developing a technology that is guaranteed to be steps ahead of whatever impairments AT&T and the cable co’s can throw in your digital path.

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  3. Om,

    Have you looked at a company called damaka? check them out! I think they are doing good work.

    jk

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  4. Teltel is backed by the same Purple Communications that made a bid for Asia Global Crossing during its distress sale a few years back.

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  5. Jk,

    I have been using damaka for the past few months and I must say they have come a long way with quality and security. I definitely have a better quality calls on PC using damaka than skype. Also, it makes me feel better that damaka is standards based application and does not have the “negative/dark” sides of skype.

    I love the features in damaka client – call recording, off line messaging, built in media player, weather, traffic report etc…

    Cheers.
    Ram

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  6. I have been using a SIP-based Peer to Peer application for the past few months: DAMAKA
    damaka.com

    I am very impressed by the quality of not only voice (pc to pc, pc to phone) but also by the video quality…

    I compared the video & audio quality with MSN/Yahoo/Skype. Damaka’s video quality was consistently better than M/Y/S.

    Has anyone else compared the quality???

    They provide the cheapest rates for their PC to Phone service… and the quality was execellent.

    They recently released free Internet TV… very cool… check it out

    OM, have you checked them out? I am sure its a good candidate for VC investment as their business model appears to be interesting.

    ~Sandel

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  7. Well more and more companies are trying to secure funding before the next market crash. The possible US slowdown isnt a good sign for funding. The market will be crowded with new startups trying to empty VC’s pockets. i seriously hope they get some returns. The best bet is perhaps to exit early in the gamble :-)

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