Vonage Raises Another $200M

VOIP specialist Vonage Holdings Corp. will soon announce that it has raised a whopping $200 million in its fifth round of funding, as it prepares to launch into new territories outside North America, Light Reading has confirmed.

The latest investment, led by Bain Capital, takes Vonage's total funding to $408 million, and comes only eight months after the service provider's $105 million Series D round (see Vonage Dials Up $105M ).

Last August the company said it needed funds for international expansion into Europe, Asia/Pacific, and Latin America. It has since launched in the U.K., though without the anticipated marketing push (see Vonage Tiptoes Into the UK).

A Vonage spokesman confirmed the value of the round and that Bain Capital was the lead investor, but said an official announcement and further details wouldn't be made public until Monday.

While Vonage seems able to raise increasing levels of cash to fund its expansion, some folks have wondered about future profitability. Competition is rising in the VOIP services, with increasing pressure from all competitors, including incumbents. (See LR's TIC: Get Me Video, AOL VOIP: You've Got Apathy, VOIP Goes Mobile in NYC, and Vonage Hits ISP Resistance.)

Kevin Mitchell at Infonetics Research Inc. isn't convinced that Vonage makes an attractive investment opportunity. "Someone clearly wants to throw away their money. I don't understand Vonage's end game." To be acquired, perhaps? "How much would you get for a sales and marketing operation? I can't see how the investors would get their money back," says Mitchell.

Vonage, which has encountered some business and operational speedbumps of late, now has more than 500,000 residential and business customers, but is facing increasing competition from traditional fixed-line carriers and the large cable operators. (See Verizon Outlines VOIP Service, Texas: Vonage 911 Is a Joke, Vonage Off the Hook, Vonage Reaches 500,000 Lines, XO Launches National Biz VOIP, Vonage Hits ISP Resistance, Cable VOIP Subs Jump 900%, and Cable VOIP Could Boost IXCs.)

— Ray Le Maistre, International News Editor, Light Reading