Another VoIP Startup in Trouble

14 thoughts on “Another VoIP Startup in Trouble”

  1. In terms of profit, VOIP only worked for existing telecom operators. However in terms of usage there are hundreds of VOIP provider are providing services and users are using them but I don’t see anyone making big money. There are 2 sides of VOIP 1) Access side and 2) Peering side. Existing operators exploits peering side of VOIP to connect call over IP across differnt geographic location whereas keeping access side circuit switched and cut their capex. On access side of VOIP compeitition is too much that only bigger player can survive.

  2. @Vipin,

    I think the value proposition hasn’t gone beyond cheap or free calls so there is very little opportunity for a long term sustainable model. I think there are some folks who are doing well because they make gear/back end software but even those success stories are hard to find.

  3. My company has a similar VoIP client but we do not focus on consumers. Our pitch is encrypted VoIP for corporate customers and I truly believe is more sustainable than selling cheaper minutes. However the scale we can achieve (we have no virality – quite the opposite in fact) and the fact we didn’t go consumer so far has costed us a lot in terms of raising VC cash.

    I have to say that in the current climate it’s a safe choice… we have in the pipeline prospective customers that are scaling back all other investments and freezing their 2009 budgets. If you sell cheaper and cheaper minutes you end up giving free airtime and subsidize it with ads, which puts you in competition with Google and possibly Blyk in the UK. Notwhistanding the fact that mobile operators (assuming you’re not only on wifi) they can simply charge you a lump sum and give you free calls in the first place.

    The basic issues facing mobile VoIP are battery consumption due to radio turned on, traffic on the spectrum which is not really consumer friendly (hate them or love them, mobile operators have paid dearly for that spectrum and they have to protect it) and this coupled with the fact that the end user does not get any advantage by making a plain VoIP call vs. a circuit swicthed one.

  4. Here’s why I disagree vehemently with most angel investing as well as VC: the guys doing the pitch filtering have NO CLUE about what kind of business is truly profitable. VoIP in the long run is a commodity. Commodity businesses deal with massive numbers of clients with low profitability. It’s like trying to start a company to sell Vitamin C tablets: it’s going to be a losing proposition.

    There are no “new trends” to VoIP, unless you can magically create a new codec to compress data faster and smaller, and that won’t happen. VoIP is a dead end for VC and angel investing.

    The business ideas I pitch to angels are profitable, expandable, and have almost no competition, but the morons who run the joints only want to hear about Web 2.0 and the Internet, even though future profitable investments will rely on P2P manual services rather than B2B electronic services.

    If I see another VoIP business plan come through my email box, I’ll croak. Telecom is dead, unless you’re designing something that is truly P2P without software or signifcant user install intervention.

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