April showers, they say, bring May flowers. But if you are an independent voice service provider, like Vonage and SunRocket, then in April, you were showered with just bad news, and May is more like Dis-May.
Ever since the Vonage-Verizon patent fracas became a street fight, investors – both public and private – have lost taste for independent VOIP companies. Vonage’s stock has done a not-so-graceful swoon. And Packet 8 has seen its already anemic stock get pummeled.
Now we are hearing that even private money, aka venture capitalists, are turning their back on VoIP companies. Our sources in the business tell us that SunRocket, the #2 independent is out raising its Series D round of financing, hoping to get $20-to-$40 million to stay in the game.
However, no VC is ready to bite just yet, not with the Verizon-Vonage tussle hanging over the market like a dark cloud. It is not just SunRocket – pretty much the whole sector is a do-not-touch zone right now.
This is a crucial round of funding for the company that has raised $80 million so far in three rounds of funding, lost its co-founders, and brought in a new CEO who has a very different view of the world. If that is not enough, then the growing strength of cable in the VoIP business is only going to add to their miseries. Not that we are exactly surprised.
4 comments so far
6:18 PM PT
Om, do you think it has more to do with the patent lawsuit or just the business case of a pure play VoIP play?
Voice is trending to zero, is that a place you really want to put your money?
7:18 PM PT
…no surprise the $$$’s turned cautious here…between the many patents (some valid; some not)…the competition…the race to (near) all free voice communication…it’s a veritable VoIP mine field out there…
The VoIP landscape…is becoming a moonscape…for anyone (without a boatful of patents) foolish enough to enter it.
7:10 AM PT
This is surprising? The only thing surprising in my mind was that Sunrocket was able to raise the $80M in the first place for a second-rate, Vonage look-alike service.
9:57 AM PT
The tendancy of analysts is to cast fear, undertainty and doubt in situations like this. There are several things being overlooked here:
- people love alternatives to cable companies and old guard voice providers (ILECs); this was a primary reason people chose services from companies like Vonage and SunRocket in the first place; this will continue to be a primary factor driving business to any alternative service provider; the emotional desires of human beings that helped to create this communications segment in the first place will not go away.
- the patent issues raised by Verizon only apply to Vonage, not SunRocket or other VoIP providers; if Verizon wasn’t concerned about Vonage or other VoIP service providers, do you think they would be filing patent infringement lawsuits? This patent infringement suit tends to validate the businesses of these VoIP service providers.
- voice is trending to zero? We’ve been hearing that for quite a while and it still makes up one of the biggest line items on most consumer and business phone bills. If this wasn’t a significant threat to ILECs like Verizon, they wouldn’t be making a fuss. Also, less competition from companies like SunRocket and Vonage make it less likely for voice to keep “trending toward zero”.
- with regard to SunRocket in particular, if Vonage does get significantly impacted or even shut down by Verizon, there is no question that a large chunk of Vonage subscribers will go to other VoIP providers like SunRocket, so they would be in a position to benefit from this….unless you think everyone will just happily start paying Verizon and AT&T again.
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