September 2000

Show Me The Money!

BY RICH TEHRANI

Now, as I write this column, the Nasdaq is having one of its worst weeks of the year and yet under these disastrous circumstances, there have been numerous recent technology IPOs that demonstrate the Street's confidence in the future of communications.

BizWatch
One of the most comprehensive sites devoted to investment activity in the communications market is located on the BizWatch channel of our very own TMCnet.com. I visit this channel frequently so as to keep up with all the financial activity in the industry.

My favorite part of BizWatch has to do with the latest IPOs. In a market virtually devoid of successful IPOs, communications offerings are bucking the trend. As I mentioned above, this has been a bad week for tech stocks. In fact, today (July 28) the Nasdaq is being punished downward by five percent, and is actually down over 10 percent for the week. We should be surprised to see any interest at all in public offerings. But there is interest -- actually tremendous interest -- in this market. Take a look at some of this week's offerings and current prices that I took off BizWatch today (see Table). The growth of the entire index is a staggering 96 percent, not bad when you factor in the relatively poor market timing.

Table 

FOLLOW THE MONEY
VCs don't seem to think there is any end in sight to the communications IPO euphoria; in fact, venture capital funds are generating tremendous amounts of capital to invest in startups and pre-IPO companies. Some estimates report that well over $10 billion dollars has been raised in just the first six months of this year alone!

You may wonder, where exactly is all this money going? Indeed $10 billion is a huge sum of money. Where on earth could VCs be putting it all? I was interested in learning more about these investments so with the assistance of Internet Telephony's Editorial Director, Greg Galitzine, I have collected information on just a few companies that have recently received financing. This information can be very useful as it gives us an idea of where people with huge sums of cash and influence are betting the future is. Can VCs be wrong? Sure they can. But that's not the point -- what is important is that this is where the dollars are going and that these companies will be the ones getting all the attention and media coverage in the foreseeable future.

Communications ASPs
One of the companies I discussed last month, Congruency recently received $10 million in financing. Congruency is one of the first pure communications ASPs (application service providers) in the market. The communications ASP market is really poised to take off. There is a tremendous amount of activity among service providers, both new and old, as well as equipment and software vendors angling to become major players in this category. In fact, this market is so hot, that TMC (our parent company) will be launching a sister publication to Internet Telephony called Communications ASP early next year. Subscribe today at www.caspmag.com!

Congruency has a strong focus on allowing customized communications services to vertical industries and they have a great HTML screen-based telephone that allows easy access to these features. There are so many companies trying to become communications ASPs and they are all trying to niche themselves. To give you an idea of just how many ways communications ASPs can differentiate themselves, witness Blue-Silicon a communications ASP that focuses on supplying messaging solutions to corporations. This company recently received $10 million of funding.

Enhanced Services
Another company that just received substantial financing (to the tune of $15 million) is Pagoo. Pagoo is an Internet telephony company and, amusing name notwithstanding, they are seriously poised to become a big player in the market. They offer customers Internet call waiting, PC to phone calling, call forwarding, an online phone book, voice mail, caller ID, and more. If you've noticed AT&T's stock price dwindling in recent times, it is because companies like Pagoo and others are raiding AT&T's customers from every angle. And, all the major long-distance companies have had to lower prices in response. As long-distance calling is getting less and less expensive, companies like Pagoo are focusing on enhanced services to differentiate themselves. Pagoo is not the only company in this space to receive funding; Z-Tel, which debuted on the Nasdaq in December 1999, has recently entered into two agreements under which it is to receive up to $106 million in total funding. They received commitments for a $56 million private placement of convertible preferred stock and warrants, and have executed an agreement that provides for up to $50 million in accounts receivable funding.

As enhanced services become a more crucial element in ensuring service provider success, it should be obvious that VCs would want to pour their money into companies devoted to allowing service providers the ability to provide enhanced services to their customers. New Jersey-based dynamicsoft, one of the most innovative companies in the IP telephony/enhanced services market, recently received a $40 million cash infusion. I expect to see great things from this company in the future... To date, dynamicsoft has won Internet Telephony magazine's Product of the Year Award two years running, and they were a big part of ConvergeNET at last year's INTERNET TELEPHONY EXPO, demonstrating interoperability with other vendors.

Broadsoft, another company that helps service providers deliver differentiated services recently received $23 million in second-round financing. Broadsoft provides service delivery systems and service creation tools for next-generation communications networks.

GOOD TIMES AHEAD
Believe me, I could fill this whole issue with information about the mergers and acquisitions and investment activity in the market at the moment. There is incredible enthusiasm out there and there are tremendous opportunities for the companies that are trying to take advantage of the next generation of communications technology. Choose wisely, and good luck to you all. 

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Surf & Sun, And A Conference Second To None

What a difference a year makes. Words cannot explain the incredible growth in exhibit space (over 100 percent) at Internet Telephony Conference & EXPO in just one year. The Hotel del Coronado, the show's venue, will be filled to capacity on October 46, with more attendees than any other conference ever held at this majestic location. The show is so packed with new products, software, hardware, and exhibitors that we actually have a waiting list for companies that are still trying to find a way in. So what does this mean for you? Simply put, there's just no better venue to learn about and see every new development in IP telephony.

The response to last year's conference program was so great that this year's attendance is on track to grow by 200 percent over last year. Even the Exhibit Hall attendance has doubled when compared to the same point last year. And registration is still open.

The conference program is divided up into four different tracks: Service Provider; Developer/Reseller; Corporate/Enterprise; and General/Special Interest. For complete descriptions of each session, visit our Web site. But to whet your appetite, I will list a few of the compelling tracks that you won't want to miss:

• Benefit From The Productivity Gains And Economics Of Internet Telephony;
• Telecommuting Via IP: New Solutions, New Options;
• Voice-Enabled E-Commerce: Choices And Opportunities;
• The IP Enabled PBX: Upgrade Options And Enhancements;
• 3Com Roundtable... Now We're Talking: Justifying, Planning And Implementing Your Next Enterprise Voice System;
• Leading IP Telephony Trends;
• The Evolution Of The Next-Gen Network;
• Send Your Packets First Class: Class 5 Switch Alternatives For The Network's Edge;
• So You Wanna Be A Telco Too: Internet Telephony Opportunities For ISPs;
• How To Be A Perfect Host: ASPs And Opportunities In Outsourcing;
• Cable Telephony: Ready For Prime Time?;
• The Role Of The Gatekeeper In A Next Generation Network.

We really appreciate your support. A great deal of the readers of this publication become attendees at Internet Telephony Conference & EXPO, and without your support we wouldn't be able to offer such a robust event with so many new conference tracks and so many products to compare in such a relaxed and gorgeous setting. The Hotel Del is one of the most beautiful trade show settings imaginable. The Exhibit Hall literally overlooks the Pacific Ocean, just a few hundred feet away. You have got to come see this event for yourself. And keep in mind, you will want to spend the weekend before and after the show at the Hotel Del. There is a lot to do in San Diego. You will arrive home refreshed and educated beyond belief. 

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Interoperability is still the most crucial barrier that must be overcome in the IP telephony market. Make no mistake, circuit-switched networks will yield to packet-switched, and as the transformation takes place, countless vendors' equipment will find its way into service providers' networks. And the only way to ensure that all of these solutions interoperate is to test them thoroughly. To that end, ConvergeNET, the world's largest and longest running IP telephony, multi-vendor interoperability event, serves as the testing ground to ensure compatibility.

You simply must come to Internet Telephony Conference & EXPO and check it out for yourself. Over 30 companies are expected to demonstrate interoperability at the fourth ConvergeNET, making this by far the largest such event ever offered. For more information, visit www.tmcnet.com/itexpo. 

[ Return To The September 2000 Table Of Contents ]