Recently in Funding/Investments Category

Only three VoIP players "made list" on the current Deloitte 2006 Technology Fast 500, a ranking of the 500 fastest growing companies in North America.

To determine the fastest growing companies, Deloitte calculated the revenue growth percentage over five years, from 2001-2005.

Cbeyond came in at #22, M5 at #54 and Broadsoft at #99. M5 made the list in no small part due to its blazing revenue growth of 4,445% -- more than double the average increase of 2,145% among the 500 companies on the list.

By now I hope all of you have heard about the IP Communications Business Summit, a new workshop that's been added to the agenda at the upcoming Internet Telephony Conference and EXPO in San Diego.

In case you missed the email blasts, TMC and yours truly (RCG) are presenting this unique workshop to help educate the investment community -- including venture capitalists,
investment bankers, financial industry analysts, M&A specialists, angel investors and any other interested parties -- about the leading industry trends and market drivers in the hopes of ultimately identifying attractive IP communications companies.

The discussion will be feisty, informal, and hopefully fun and illuminating for everyone.

And since admission is free with any registration plan, you have one less reason to not check it out!

Summit Speaker Update:

We recently added notable industry analysts and bloggers to the panels, including Jon Arnold of J Arnold Associates, Ronald Gruia of Frost and Sullivan, and Ken Camp of IPadventures.com.

In addition, Ray J. Hernandez, Managing Director, Investment Banking at VC firm ROTH Capital Partners, LLC, has agreed to present a session described below:

Valuing Voice over IP Services:  A Public Market Perspective
October 10, 2006, 2:15 pm -- 3:00 pm

Certainly one of the most exciting things about the IP communications market is the growth of new businesses offering Voice over IP services.  Indeed, there is still a vast amount of untapped market potential in the industry, and the dramatic rebound of the economy together with renewed confidence in the industry’s prospects has helped the growth of Voice over IP services across all market sectors. As Voice over IP services providers build their businesses, they will want to know how much their businesses are worth.  In this session, you’ll learn about how Voice over IP is being valued in the public markets and what adds to and detracts from building value in a Voice over IP business.  

Some background on Roth Capital Partners:

Since 1984 Roth Capital Partners, LLC has been a leader and innovator in the small and micro cap markets.  Roth provides a full spectrum of investment banking services, including raising capital, research coverage, creating liquidity, trading and market making, merger and acquisition advisory services, sales support, and investor conferences.

Over the last ten years, Roth has raised over $8.7 billion for small and micro cap public companies and completed over 123 merger, acquisition and advisory assignments.  In 2005, Roth raised $1.7 billion for its clients, and the firm has been the leading placement agent in the U.S. over the last two years for the number of PIPE transactions, raising over a billion dollars.

Managed Service Provider (MSP) Whaleback Systems just completed a $7.5 million Series B round of financing, led by Castile Ventures with participation from new investor Egan-Managed Capital and existing investor Ascent Venture Partners. The financing will be used to expand Whaleback's channel and geographic market coverage and to fund aggressive feature development for Whaleback's CrystalBlue SMB Voice Service.

Unlike traditional systems, the Whaleback CrystalBlue Voice Service is 100 percent premises- based and software-driven. It includes an IP PBX with Key System Unit features and Road Warrior Functionality, and features an all-inclusive, unlimited nationwide calling package for SMBs that need between 5 and 1500 stations.

Castile Ventures is investing its third fund in innovative enterprises developing future generations of enterprise, mass market and service provider information technology.
Founded in 1998, Castile Ventures is a top- performing early stage venture capital firm investing in innovative enterprises developing future generations of information technology for enterprises, service providers and the mass market. Currently managing three funds, Castile’s investments include Ahura Corp, Brix Networks, GeoTrust (acquired by VeriSign), Neah Power (NPWS), Network Intelligence (acquired by EMC), Quantiva (acquired by NetScout Systems), Sandbridge Technologies, SilverStorm Technologies, Sonus Networks (NASDAQ: SONS), Stargus (acquired by C-COR), and Trapeze Networks.

Packet Island Inc., a provider of VoIP lifecycle management solutions for the SME VoIP market, received its first round of venture funding from a group of venture capital firms led by Startup Capital Ventures. The other VCs participating in the Series A round are Garage Technology Ventures and Rincon Ventures.

According to Andy Aczel and Preveen Kumar, co-founders of Packet Island, “We took two years to build a solid SaaS platform that had the architecture to support the deployment model and economic sensitivity of the SME market. By focusing our SaaS platform to solve the VoIP management needs of the IP Centrex market, we’ve been able to address a burning problem in a fast growing space, and gain industry recognition by means of key industry awards. We wanted investors who had the breadth and depth in the markets we were going after, and that’s exactly what we got with our VC syndicate led by Dr. John Davidson from Startup Capital Ventures.”

Dr. John Davidson, co-founder and CTO of LAN pioneer, Ungermann-Bass, and General Partner of Startup Capital Ventures, says  “As a long time participant in the networking industry, I have seen the remarkable scaling down of the price and size of enterprise networking gear without seeing an attendant reduction in complexity. Small companies can now cost-effectively deploy all the networking functionality of a large company, but typically must rely on a Managed Service Provider to insure its smooth operation. Service Providers in turn need a scalable solution to manage and control client networks from a distance. Packet Island has architected a remote network analysis platform which it deploys in a Software as a Service (SaaS) model to meet the needs of MSPs. The company has correctly aimed its first service modules at the Perfect Storm in which a total absence of management tools for Voice over IP systems is met by the ready availability of these mission critical systems for small and medium sized businesses. With more than 17 million traditional Centrex lines converting to VoIP in the next few years and with over 7 million SMEs in the US eligible to participate in this conversion, Packet Island has chosen a fertile space in which to make its initial product thrust.”

Founded in 2004, Packet Island Inc. is located in Silicon Valley. Since its founding, Packet Island has pioneered the development of SaaS-based solutions for the remote management of SME networks. Packet Island’s core technology is based on a highly scalable SaaS platform called PacketSmart, and small 4”x4” plug-and-play micro-appliances that are used for deep packet inspection. The PacketSmart platform consists of a scalable cluster of software application servers that have been built from the ground up to deliver remote network management services to hundreds of thousands of SMEs from a single hardware infrastructure. The first set of network management service modules that Packet Island has launched on PacketSmart is targeted at the fast growing IP Centrex market. These service modules enable VoIP service providers to offer VoIP network assessment, VoIP installation verification, VoIP troubleshooting, and VoIP SLA Management services to the SME market without any truck rolls.

The secret is out, and Emergent Network Solutions is the acquireree. Full press release of the deal follows:

Stratus Acquires Emergent Network Solutions for Next-generation Telecom Software and Services

Adds network convergence, VoIP and IMS solutions

FALL VON CONFERENCE, BOSTON, September 12, 2006 – Stratus Technologies, Inc. of Maynard, Massachusetts announced today the acquisition of Emergent Network Solutions of Allen, Texas, an innovator in advanced telecommunication software and services that enable carriers and service providers to integrate current and emerging network technologies. The purchase amount is $11 million, with provisions for additional performance-based payments.

Emergent’s focus on products and solutions for voice over the Internet (VoIP) and IP Multimedia Subsystem (IMS) builds out Stratus’ strategic business initiative and current solutions for Fixed Mobile Convergence (FMC) and Service Mediation, which enable disparate network technologies to operate together seamlessly. Stratus is committed to offering carriers and service providers interoperability between traditional wire-line networks, mobile and cellular networks, and rapidly growing VoIP and IMS services like those made possible by Emergent. This network-convergence strategy addresses fundamental revenue-generation and subscriber-retention issues confronting telecommunications service providers today. It also strongly positions carriers and service providers to leverage their existing infrastructure investments as they embrace and migrate to emerging network-infrastructure standards in the future.

“The adage that the whole is greater than the sum of its parts applies perfectly well here, for both Emergent and Stratus,” said David J. Laurello, Stratus president and CEO. “Our business strategies blend very well. And because we approach the market from different sides of the convergence paradigm, our engineering expertise, products, channels, and customers also complement each other. I am exceptionally pleased to have Nathan Franzmeier, Emergent’s founder and CEO, and his entire team join the Stratus Technologies family.”

As a result of the acquisition, which closed August 11, all former Emergent employees and contractors have transferred over to Stratus and will continue to operate from Allen, Texas. Nathan Franzmeier will assume the position of vice president, Emerging Network Solutions, a new Stratus business unit, and will report directly to Laurello. In his new position, Franzmeier will have overall responsibility for the combined Stratus and Emergent telecommunications strategy.

Founded in 2001 in the Dallas area, Emergent Network Solutions has approximately 32 employees and contractors. The company has built a global customer base of approximately 130 installations at 100 small-to-medium-sized wire-line carriers through both direct and indirect sales channels. It has approximately 20 resellers in the Americas, Europe and Asia/Pacific region.

“Stratus has excellent standing among the major global carriers and telecommunications equipment providers, as well as significant sales resources in both telecommunications industry and enterprise telephony markets,” said Franzmeier. “This accelerates the exposure of Emergent’s exceptional solutions and specialized services to a much larger segment of the market and broadens market appeal when combined with Stratus’ hardware, software, and solutions.”

The opportunity today in the converged network solutions market is conservatively $2.0 billion according the industry sources, and growing rapidly.

Just heard that Stratus Technologies is making an announcement tomorrow (Tues, Sept. 12) about an acquisition in the telecom space -- will post an update when I find out who it is.

Apparently, the word hasn't spread as far and wide as I had hoped, as a number of people I've spoken with recently weren't aware that the upcoming VoIP Demo and IP Communications Business Summit events have been rescheduled and moved venues.

Originally slated for this week in Santa Clara, the events are now proudly co-located with the Internet Telephony Conference and EXPO West, at the San Diego Convention Center in San Diego, CA, October 10-13, 2006.

This is exciting on a number of levels, including the fact that the October timeframe is far better from a show schedule perspective than mid-summer, and also the events will be in a prime position to serve an even greater attendee base, as upwards of 9,000 IP communications-interested attendees are expected to converge on the convention center.

For more information about the agenda, visit the VoIP Demo show site here.

Ayalogic, an Akron, Ohio-based, privately held business communications software company founded in 2002, just received a vote of confidence by its investors with the announcement of an additional $1.25 million, on top of the original Series A investment of $2M in October 2004. Most of the additional investment came from current Ayalogic investors, including Early Stage Partners LP of Cleveland, and Draper Triangle Venture LP. Both contributed about $500,000 each, and Northeast Ohio’s own non-profit venture development group, JumpStart Inc.,  added $168,500 to the investment. The company appears to be meeting a number of benchmarks for actual deployments and customer acquisition. 

Ayalogic sells Qmunicate™, a SIP and presence-powered business communications solution, that helps transform the way users interact across their professional relationships. This software integrates voice, text and document transfer tools into a single customized platform that can be deployed across all communications devices (Phone, Mobile Phone, PC, PDA).

The Qmunicate solution helps organizations implement specific communications ecosystems, where their relationships with their customers, vendors, partners and internal departments are all leveraged and enhanced through a rich set of presence-based communications features and collaborative computing capabiliities . Ayalogic calls this ecosystem of key relationships the "Qmunity".

Here's how the Qmunity™ works:

Each host company invites valued clients, suppliers and partners to join their Qmunity™ . Once a Qmunity™ member, users can download software to their PC's, Phones, Mobile Phones, and/or PDA devices, which enables them to more efficiently communicate with their host.

Members of this privileged Qmunity™ are provided with enhanced access and relevant information about their host through the Qmunity™ dashboard application. As a member of the Qmunity™, each individual will be able to make informed decisions about their communication choices. They'll know who's available, how many calls are in queue or they can select a self-service option that allows them to bypass the queue and conduct an authorized business transaction. Communications options include speak live, voice message, text message, transmit data, and the self service kiosk.