Dear Mr. VC

Rich Tehrani : Communications and Technology Blog -
Rich Tehrani
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Dear Mr. VC

To be more politically corect: Dear Mr. or Mrs. VC

Many of my readers are in the VoIP community – you know who you are… You were doing VoIP in the late nineties – when it wasn’t fashionable and you used to call it IP telephony or Internet telephony. I am running into more and more of these people and they often ask me if this time the IP revolution is for real. The answer is absolutely.

As President of a leading publishing and trade show company having been involved in VoIP since its inception and having launched the first magazine in the space, I think I have a unique perspective on the market. I am seeing more optimism and sales than at any time before. I saw purchasing in ‘99-2000 but many of those sales were to CLECs that were new, venture backed and lacking long-term business plans.

So why is it real this time? Simply stated, because this stuff works and works well and most importantly perhaps, the stigma of VoIP being bleeding edge has worn off and has been replaced by the stigma that anything that isn’t VoIP is legacy. That is a powerful argument for the success of any industry – the competition to VoIP is basically outdated.

Barring geopolitical events beyond our control it would seem that the industry is healthier and has a brighter future than ever. The level of optimism I am seeing is unmatched and is exceeding what I saw in 2000.

There are a number of companies looking to take advantage of the VoIP space and many of them are still not funded well and don’t market. These companies are going to have a virtually impossible time making it. If you don’t have funding to market properly, you better come up with a business plan like Skype or hope that someone swoops in to purchase you.

The fact is the PR and marketing machines in virtually all companies are running on all cylinders or at least most cylinders. The landscape is becoming much more competitive.

I have met a few companies where they tell me they need to sell some products before their investors will give them money for marketing. I hope these investors are reading. Do you really think anyone wants to buy products or services from companies that they haven’t heard of? If the product is under $100 maybe, but if you are an investor in a company that produces VoIP equipment costing thousands of dollars – no one will buy these products if they haven’t heard of the company. Would you put your job on the line, buying from a company that can’t afford to tell the market what they do? Of course not. Either will anyone else.

I suggest you cut your losses and see if you can find a company with a Skype like model to get involved with.

In my experience – the companies with the best technology hardly ever win any competitive races. It is the companies that understand PR, marketing and messaging that win. We are coming out of a time when there were more telecom company bankruptcies than in any period in history. Marketing (PR, trade show exhibits, advertising, direct mail, etc) shows strength and stability. Your potential customers will not buy from you if they are not sure you will be around.

In today’s ultra-competitive VoIP market you cannot be heard, seen or gain mindshare if you don’t spend. As a rule you should be spending no less that 20% of what you spend on R&D on outward marketing. A company that wants to grow more quickly needs to spend 30% or more (I am already getting feedback -- an hour after posting that 40% is a good high-end number). Technology can be built by anyone and the features and functions you think are so novel today will be duplicated tomorrow – and you don’t have enough money to sue all the people that may infringe on your patents.

A company is about it’s brand, not about it’s products. Sure, sometimes a product becomes stronger than a brand (iPOD, VW Bug, etc) but there is still branding that must be done in any and every industry. VoIP is growing faster than virtually all other tech markets and real profits are being made. Everyone wants part of this pie and it takes branding and imaging and an overall marketing strategy to claim a piece of it. If you enter a marathon and don’t have enough stored up energy for the race, you don’t finish. Dear, Mr/Mrs VC, are you in the race to win or watch your runner die off at the half-way point?

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