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Optical/IP

VCs Pump $18.8M Into Skype

Peer-to-peer VOIP service provider Skype has raised $18.8 million in a second round of funding as it works its way towards the launch of pay services (see Skype Pockets $18.8M).

The company has signed up 3.5 million registered users of its free VOIP-enabling software since its launch last August, with founder Niklas Zennstrom and his team providing numerous upgrades and additional free features since then (see Skype Offers Free Conference Calling, Skype Adds Asian Languages, and Skype Rings Jingle Bells). It's not known how many of those who've registered are regular, active users.

The company is to use its new funding to add to the current 30 or so on staff, and develop further features and applications that will be part of the paid-for premium service Skype is planning to launch later this year.

The new funding round is led by Draper Fisher Jurvetson and Index Ventures; the identities of other investors are not being revealed.

The firm's undiclosed initial funding round closed in mid-December. That cash came from Tim Draper (as an individual investor), Draper Investment Co., Bessemer Venture Partners, and Mangrove Capital Partners.

With its large, and growing, user base, Skype represents a bit of a threat to the established voice players, as the quality of its service has led telecom industry analysts such as Kevin Mitchell at Infonetics Research Inc. -- and not just students and other bargain-hunters -- to use and praise the service.

And the upstart has clearly got under the skin of established carriers looking at ways to corner the VOIP market for themselves, as it was singled out for a verbal assault at last week's VOIP service launch by BT Group plc (NYSE: BTY; London: BTA) (see BT Does VOIP – With Strings Attached). BT Retail's director of online services Andrew Burke described Skype as "primitive" compared with BT's new offering, quipping that the company was aptly named, as "there's a lot of hype around Skype."

No one was available from Skype to respond to talk about its plans for paid-for premium services that might counter BT's "primitive" jibe. Zennstrom, the only Skyper who's allowed to talk to the media, is currently traveling. He did, though, give us his view of the world last summer as he was preparing to launch Skype (see KaZaA Founder, Niklas Zennstrom).

This year is shaping up to be a critical year for the development of VOIP applications that will bring packet voice services further into the mainstream, and Light Reading's sister site for the service provider industry, Boardwatch, is running a poll on the subject: click on this link to add your vote.

Today also brought encouraging news for one of Skype's key suppliers, Global IP Sound AB, which announced a new deployment (see WebEx Chooses Global IP Sound). The vendor's technology provides echo cancellation capabilities and enables Skype's software to translate analog voice into digital packets.

— Ray Le Maistre, International Editor, Boardwatch


Archive of Related Light Reading Webinar:

dljvjbsl 12/5/2012 | 2:15:00 AM
re: VCs Pump $18.8M Into Skype Does anyone know what the premium services that Skype is going to offer, are?
technonerd 12/5/2012 | 2:14:59 AM
re: VCs Pump $18.8M Into Skype This isn't "venture capital," it's teeing it up for the IPO. ASAP, they'll want to palm this off on the dumb money, i.e., the pension funds and mutual funds. VoIP is not a business, but hey, this didn't stop anyone before ...
aswath 12/5/2012 | 2:14:58 AM
re: VCs Pump $18.8M Into Skype Does anyone know what the premium services that Skype is going to offer, are?

At the time of introduction, they suggested conference calling, voice mail and PSTN connectivity. Now conference calling has been added to basic capability.

My basic question is if I really believe in "intelligence at the edge" and P2P, how can I at the same time talk about premium services? technonerd's explanation is probably closer to truth.

OR, the real business model is licensing the software to standalone device manufacturers: "VoIP is a product not a service."
technonerd 12/5/2012 | 2:14:57 AM
re: VCs Pump $18.8M Into Skype At the time of introduction, they suggested conference calling, voice mail and PSTN connectivity. Now conference calling has been added to basic capability.
Funny, because of those three I'd say conference calling is the closest to anything "premium." And of course we all know that all three of these are readily available on the PSTN.


OR, the real business model is licensing the software to standalone device manufacturers: "VoIP is a product not a service."
Now that would truly be a knee-slapper, given that VoIP in and of itself is easy. The only value you can really add is in the network, i.e., the a more deterministic path for the packets be it through traffic classification or overprovisioning of bandwidth.

Nah, they're teeing up the IPO or maybe setting up the pre-IPO mergers that will then lead to the IPO. Funny, too, is how little money the VCs are putting into this one. $19 million? Hah!
technonerd 12/5/2012 | 2:14:52 AM
re: VCs Pump $18.8M Into Skype I wish rolostar would integrate an Internet electric shock device that would zap mishaola every time he spams this web site.
drosenthal 12/5/2012 | 2:14:41 AM
re: VCs Pump $18.8M Into Skype First off, VoIP is neither service nor product, its a technology enabler. Initial VoIP vendors like VocalTec and Clarent used VoIP as a technology to create and sell products. Their customers created the first Internet Telephony services which were based on low-cost, low-quality service. Skype has taken that model and added a few new services, but those services are readily available on the PSTN. As competition increases with Vonage/Skype style offerings, only service providers that can add some sort of value with new services, great customer service, integrated wireless, find-me/follow-me/screen-me.

VC money will follow and stick with service providers who can innovate in a way that either prevents subscribers from leaving them or entices them to stay...and hopefully tell their friends and family.

3 basic services(SKYPE) in a brutally competitive residential marketspace isn't going create any success, at best it produces a mediocre aquisition for a languishing CLEC.
technonerd 12/5/2012 | 2:14:40 AM
re: VCs Pump $18.8M Into Skype VoIP is neither service nor product, its a technology enabler.
Meaningless statement. Meaningless distinctions. All that matters from an investment point of view is: How will it make money; for whom will it make money; when will it make money? Near as I can tell, no one has ever been able to answer those questions.


Initial VoIP vendors like VocalTec and Clarent used VoIP as a technology to create and sell products. Their customers created the first Internet Telephony services which were based on low-cost, low-quality service
There is always a hobbyist market.


3 basic services(SKYPE) in a brutally competitive residential marketspace isn't going create any success, at best it produces a mediocre aquisition for a languishing CLEC
I suspect that the VCs stuck money into it to keep them limping until they can either be merged into some other portfolio company or be palmed off onto the pension funds and mutual funds -- the dumbest money there is -- during the next mini bubble.
aswath 12/5/2012 | 2:14:37 AM
re: VCs Pump $18.8M Into Skype OR, the real business model is licensing the software to standalone device manufacturers: "VoIP is a product not a service."

Now that would truly be a knee-slapper, given that VoIP in and of itself is easy.

From http://news.com.com/2100-7352_... :
"Skype is also expected to announce this week, at CeBit 2004, that a major European home phone maker will integrate Skype's peer-to-peer software into a new line of cordless phones the European company plans to sell. Although final designs aren't yet set, it's likely that the phone will have one-button access to the Skype service, plus a screen to display Skype's instant messaging-like interface."
technonerd 12/5/2012 | 2:14:17 AM
re: VCs Pump $18.8M Into Skype a major European home phone maker will integrate Skype's peer-to-peer software into a new line of cordless phones the European company plans to sell. Although final designs aren't yet set, it's likely that the phone will have one-button access to the Skype service, plus a screen to display Skype's instant messaging-like interface
Oh boy, and to think that I just purchased a cordless phone system for my house. Base station and six handsets. And it doesn't come with VoIP, which means that when I make my long-distance calls I will have to spend a whole 3.5 cents a minute. By the way, here in Seattle Qwest charges a nickel a minute and [i]never more than $25 a month.[/i]

Now with prices like that for POTS, how does anyone ever think that VoIP carriers have a ghost of a chance of getting off the ground?
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