RingCentral Rings Up $12 Million

20 Comments

[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. )

20 Comments

jason

RingCentral has great features and pricing. I haven’t had very many problems. Customer service leaves a little (well maybe a lot) to be desired.

Adam Smith

Hi – I tried almost all systems out there.

Finally, I settled with PBX Plus. It works with my Skype, offers free speech recognition,

voicemail and voicemail transcription, unlimited extensions and sub-extensions, FAX etc.

For a limited time, they are also offering a free PBX in US and UK. (http://invox.com)

CL Jones

Stay away from this company they are hiding behind a mailbox and do not provide U.S business or citizens with representation in the United States and comply with U.S law when customer request cancellation of products. They do not compelte orders, nor do the provide quality service. This is not a company interested in anything beyond taking the business or consumers money.

CL JOnes

Ring Central refuses to provide US customer service and is a sorry company. Our citizens deserve better than what this company is delivering.

John

Time to cut this company loose – they will fall into the ocean after racking up money for what seems to have been a good service. But with a failing economy they have grabbed the money and are starting to let business die. I spent over 2 months with them simply trying to move a phone line. Their inability to even tell whether or not they are servicing your account was embarassing – how could the telephone company not know if they are providing service to you? After 10 days of embarassing calls from them from people who clearly had below average IQ, I told them I’m declaring a material breach of contract and they can give me all the money back from day one. I’m moving all of my services and will also charge them for what they cost me thanks to incompetence –

How bad? I have customer support tickets they can’t locate or just “don’t know” why they were closed. I got confirmations that things were received to be told a month later they aren’t. I honestly don’t recall a more horribly disorganized company than this one. Perhaps they grew too fast. You can talk about ARPU all you want but this place is going to PU very quickly.

raj

Good to see that RC came out of their support issues. I know other players – gotvmail, 800pbx outsource their support.

ARPU is very low in this business to have their centers based in US. Good for them that they are raising money

Mark Howard

I’ve been using RingCentral’s Digital Line service and it has been working very well. People on the other end of the line can’t even tell that I’m using VOIP through bluetooth on my PC.

It has been fantastic and very cost-effective for my business.

I think that they ironed out the voice quality and other kinks with their latest version release of Call Controller.

Mark Howard
Elexient LLC

Barney

Ringcentral has extremely terrible hellish customer service–if they answer at all it will be english-deficient service folks at their offshore Philipino call center–who also are untrained and seem to know nothing about the product whatsoever. Avoid the pain and find someone else.

Terry Walker

What does anyone know about Pbnext- has a simliar service?

Bruce Cannon

MOST RECENT ISSUE WITH RINGCENTRAL (copied and pasted from a RingCentral automated response email):

Correspondence
Customer (Bruce Cannon) 08/06/2008 06:55 PM
“Yep. The damn fax has been sitting in the queue longer than 50 minutes and still hasn’t been sent. This is a recurring problem that RingCentral doesn’t address. I use – and pay for – RingCentral to conduct my business. If the faxing “service” you advertise doesn’t consistently function, RingCentral should advise their customers that the faxing service is intermittent and NOT CHARGE for it.

I am NOT happy paying for something that doesn’t work.”

CONTINUATION:
The above-mentioned fax sat in the queue from 6:12pm until 9:54pm – almost FOUR hours, until it was finally sent. RingCentral Customer Service assured me a Supervisor would call me the next day, which hasn’t happened (Icing on the cake: the fax never arrived). I was also assured RingCentral would adjust my bill to compensate me for my wasted time – they haven’t.

Most RingCentral Customer Service Representatives speak broken English, and are difficult to understand, but are polite and do attempt to help. RingCentral’s rates are good, and it’s great they offer a genuine “800” number – but the fax service is repeatedly rotten. Even when their digital fax is working properly, it is MUCH slower than using a traditional fax machine.

David

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

Their Internet Fax service is one of the best!

jim

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

Brian McConnell

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).

TechnoLawyer

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?

Alex

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.

Paul

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.

Om Malik

@ 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.

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