More $$$$ for Vonage
All I can say is “wow” in light of Vonage's plans to raise another US$200-million of private equity. (This brings Vonage's financing tally to more than US$400-million) The convertible offering has been sold to 22 investors, including Bain & Co. So why the need for so much cash given the company raised US$105-million last year. For one BusinessWeek believes Vonage is spending US$9 million to US$12 million a month on market to attract new business. If Vonage stopped all marketing activity, it would be cash-flow positive and, perhaps, profitable. The reality, however, is Vonage is in the midst of a high-stakes race to establish itself as the consumer VOIP service provider before the cablecos rumble more aggressively into the market. As a result, it can't afford to stop spending heavily for fear of losing momentum. So why a private round rather than an IPO? Perhaps the biggest reason is you don't have to tell anyone every quarter how you're doing. By staying private, Vonage can spend whatever it wants without being scrutinized and questioned by investors and analysts. Still, it's disappointing - at least for the time being - to not see how Vonage would have been received in capital markets that could best be described as choppy.
Forpeople who read my blog on a regular basis, I've been talking about the VOIP IPO market for months - trying to get a handle on who's out there and why they're not willing to make an offering. In today's National Post, I've got a story looking at why VOIP IPOs are not happening.
