Vonage Remains VC Darling

By Colin C. Haley | May 9, 2005 | Print this Page
http://www.enterprisenetworkingplanet.com/unified_communications/Vonage-Remains-VC-Darling-3503401.htm

VoIP upstart and venture capital darling Vonage will announce an eye-popping $200 million in new financing today in order to fund its continued expansion.

The Edison, N.J., company claims that the round, led by the venture capital arm of Bain Capital, is the largest for a tech company since the Internet industry downturn.

The backing comes less than a year after Vonage banked $105 million, and it brings its total financing to $408 million.

"We're really excited about this round and growing the business," John Rego, Vonage's CFO, told internetnews.com. "It validates our model."

The cash infusion will help the company expand internationally. Vonage is now open in Canada and the United Kingdom and is scouting markets in the Asia-Pacific region.

Rego said Vonage is looking for a country with high broadband density (a high-speed connection is a prerequisite for Vonage's Internet phone service) and favorable government regulations. Vonage now has about 650,000 subscribers worldwide and is on track to crack one million by year's end.

In addition to international expansion and its consistently aggressive advertising budget, Vonage is beginning to strike deals with Baby Bells to gain access to their enhanced 911 (E911) systems.

Under an agreement signed with Verizon , Vonage will pay the regional telecom several million dollars to interconnect with Verizon's network plus monthly payments.

Vonage expects to sign a similar deal with Qwest soon. Negotiations with the remaining Baby Bells, SBC and BellSouth are currently stalled. Some of this new round could go toward paying for those interconnections, Rego said.

Finally, the company will be hiring 600 to 700 employees this year, mostly for customer service. Vonage currently has 1,100 workers. Vonage is also hiring engineers and Web site developers. To accommodate the new hires, the company will move its headquarters to a 360,000-square-foot facility in Homedale, N.J., Rego said.

As for whether this monster venture round will be the last before Vonage filed for an IPO, Rego was noncommittal, saying he doesn't know when, or if, the company would take that step.