Vonage Explains $250M VC Round
So why did Vonage decide to raise $250-million of private equity instead of doing a much-anticipated IPO? According to Vonage CFO John Rego, issuing convertible notes was a “good structure” that was not as dilutive as an IPO. “It went rather quickly; the demand was unbelievable, there was more demand than we could fill,” he said during a quick chat yesterday. So why does Vonage need so much cash? Rego said it will be spent on working capital, building out its network and e911 deployment. Frankly, it sounds like a lot of money for these projects. As for the IPO, Rego said the company doesn't talk about future funding. “We do what we do. This is a good transaction for us,” he said, adding Vonage recently surpassed the 1.2 million subscriber mark. I still find it amazing Vonage has raised $658-million of venture capital. Just out of curiosity, does anything know of a high-tech company that raised as much private equity?
December 20th, 2005 at 2:41 pm
The CLECs in the US raised tons of capital (Allegiance, Corecomm, Rhythms, Covad, etc., etc.) after the fateful 1996 US Telecom Act that mostly created the telecom equipment and optical networking bubble. Many of them rasied US$150M rounds, but I'm not sure if any got as much as Vonage in total. There were many of these CLECs in the heyday and only one or two Vonage scale companies today, so interest in telecom services is funneling to the few as the Vonage CEO seems to be indicating.
An interesting point is how Skype required far less money, garnered far more users, but has far less revenue at this point… mapping those metrics over time would be a interesting set of visuals, especially going forward.
December 22nd, 2005 at 1:34 pm
What they should explain is why they start nickel-and-diming customers a'la good old phone companies…
January 16th, 2006 at 10:05 pm
Recently I found this Canadian VoIP player being very interesting, and they are aggressive too.
http://www.vbuzzer.com/
I'd categorize it as a Canadian Skype. My biggest wonder is: with all the Vbuzzer-like competitors out there, will the $250M really helps Vonage? It will be increasingly tough to acquire customers nowadays. Anyone knows how much in average?