20 Comments

Summary:

[qi:086] RingCentral, a Redwood City, Calif.-based VoIP company, has raised $12 million in Series B funding, doubling the amount it raised in its Series A round. New investor DAG Ventures led the latest funding, with existing investors Sequoia Capital and Khosla Ventures participating as well. The […]

[qi:086] RingCentral, a Redwood City, Calif.-based VoIP company, has raised $12 million in Series B funding, doubling the amount it raised in its Series A round. New investor DAG Ventures led the latest funding, with existing investors Sequoia Capital and Khosla Ventures participating as well. The company claims some 50,000 customers, making it one of the more successful players in the hosted VoIP sector. I was highly skeptical of RingCentral when it launched, but I guess there are 50,000 reasons why I was wrong. (I am going to post a long overdue review of RingCentral’s service later this month. )

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  1. Charlie Anzman Tuesday, March 4, 2008

    OM – Good to see you bloggin’ ! Wonder if Google will be all over this with Grand Central???

  2. Alex Rodriguez Tuesday, March 4, 2008

    RingCentral is awesome they have absolutely help me improve the image of my business.

  3. @ charlie

    thanks mate. I am not sure Google and Grandcentral are in the same ballpark as ring central. I think as Alex says, this is a service that makes most sense for SMBs with diverse needs.

  4. Agreed with Alex – RingCentral is awesome. Their customer support has slid a bit in the last year as they’ve sent more of it to India, but their services and configuration options are way ahead of GrandCentral.

    GrandCentral doesn’t offer RC’s fax services, digital lines (VOIP to a handset) or multiple extensions, but GC does have a slicker interface (and GC is free).

    I route all messages (mobile phone, fax, business and home lines) to a RingCentral box – one place to get messages, everything shows up in email…

    One caution – RC’s digital lines are not ready for prime time. The rest is great.

  5. Dude, RingCentral launched in 2001, not 2007. I oughtta know. :)

  6. Comparing apples and oranges. RingCentral has a real business, GrandCentral was just a silly……….

    The barrier to entry into this space is no longer technology – the biggest barrier is marketing dollars. Like Vonage the cost of acquisition is the key expense. RingCentral with high probability is spending at least $50,000 per month on just PPC (look at PPC costs per keywords). If the average customer is paying $30 per month then you can build a pro-forma model. If the cost of acquisition escalates then we will see how RingCentral performs. One must remember that the key competitor in this space is J2 Global which is a public company with $200M of cash on the balance sheet and over $220M in yearly revenue.

    If I was to guess there has to be a couple of small smart acquisitions that RingCentral must make to accelerate introduction of new offerings into the market. Otherwise, they will get commoditized. If there are smart guys out there looking to start a cool cash cow company look to emulate this model using Asterisk.

    Frankly, I’m very surprised that the management team decided to bring in additional VC money. Perhaps, they had no choice. But, these guys are scared shitless of losing control of the company and yet this is what may have happened with this latest round.

    The company that will get acquired in 2008 is GotVMail. Not because they have great technology (because they don’t using Sylantro switch), but rather they have a very large customer base. The dilemma is as follows. RingCentral doesn’t have enough cash to purchase GotVMail and J2 Global is to cheap to pay any type of perceived premium. As a result picking up
    a second tier company such as Callwave (NASDAQ: CALL) makes much sense since they are trading at book value ($50M cash) and revenues of $20M in revenue. In the end something has to give.

    Best exit for RingCentral is a Microsoft acquisition. Problem is that MSFT can achieve 95% of the functionality with the TellMe Networks acquisition. Cisco on the other hand could acquire RingCentral for a rounding error on the balance sheet, but,they are already starting to roll out an offering that looks similar, but yet more robust (read Cisco CUWL)—–only limitation is its client server side. From a hybrid model RingCentral needs to keep a close eye on Fonality. Fonality’s offering is already becoming a major player on the client server side, but, a hosted offering would be very simple for them to achieve, oh ya, I forgot to mention that Fonality is based on Asterisks and has the best UI in the industry.

    Conclusion: RingCentral has done a great job and believe that their management team has vision.. But, they should look over their shoulders because very large well financed companies are lurking and will probably want to compete heads-on rather than acquire. So, get your revenues to $40M quickly and IPO otherwise it could get nasty and cause sleepless nights for your shareholders.

  7. RingCentral’s service has been rock solid. But the Web interface is confusing so I hope some of the capital is used to create a more intuitive design. We still can’t figure out how to make our outgoing calls look like they’re coming from our RingCentral numbers. Any suggestions?

  8. Brian McConnell Wednesday, March 5, 2008

    The hosted PBX category is maturing, and I think you’ll see at most 2 or 3 dominant vendors thriving in 2009 and beyond. Technology is no longer a key differentiating point as far as customers are concerned (90% require a fairly basic feature set, and most do not care what is in the data center).

    They were smart to raise money. $25 million is not a huge sum by telecom industry standards, but managed wisely it will make a big difference in their ability to acquire customers, and will probably make the difference between being among the top providers and an also ran. If Ring Central’s numbers are valid, with 50,000 accounts, they probably have 250,000 seats, maybe more. I’d guess based on this they are at a $10-20M/year run rate, but probably also do not have tons of free cash flow to work with.

    I’ve been most impressed recently by Gotvmail, Ring Central and Phone.Com. All three have done a good job of making what was once an esoteric product (business phone systems) simple to understand and buy online. There are easily several million seats in the US SMB market alone, so these companies can grow 10-20x before the market becomes saturated. The winners will be the companies that do the best job at customer acquisition in the next 2 or 3 years, which will include smart direct response marketing, aggressive pricing and trial offers, and designing web interfaces that make it easy for customers to buy and manage their service.

    I don’t think these companies necessarily need to sell out. There is a long-term need for hosted communication services for businesses. J2 has proven this with their fax and conferencing product line. This is also a product businesses will pay for, so it should be a good term business for the companies that survive the consolidation underway. Potential buyers also include mobile operators. Hosted PBX is a great complement for mobile voice/data, especially the operators that cater to business users (e.g. Sprint, Verizon).

  9. I am in love with their service. The website is great. I use it weekly.

  10. I think RingCentral is a top notch company and this just reaffirms it.

    Their Internet Fax service is one of the best!

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