My Thoughts on the BSFT IPO

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

My Thoughts on the BSFT IPO

Disclaimer: I work with both Broadsoft and its customers.

I was shocked to learn that Broadsoft hasn't made money yet. Granted some of their clients came through acquisitions of Genband and Sylantro, but they have 400+ clients including many large ILEC's worldwide.

Broadsoft raised about $76M from investors, including Bessemer Venture Partners, Grotrech Ventures, Charles River Ventures, Columbia Capital, RRE VEntures, Crescendo Ventures and Meritech Capital Partners. Originally, this IPO was set for more than the $76M investment, but it was re-adjusted to the $9 share price. After 7.5 million shares sold today, BSFT and Goldman Sachs Group raked in $67.5M.

As Arunis can tell you, being public is WAY different than being VC-funded. Now you have to show revenue, which means that Broadsoft has to stop worrying about selling feature servers and start worrying about selling licenses.

Tough to do when NGT gets bought by Comcast and CommPartners files BK. A CLEC called me today to ask me if there are any profitable companies selling Hosted PBX. I had to think a minute, because most of the big guys aren't selling Hosted voice services; they are selling SIP Trunks.

There have been good moves recently though. The Cloud Communications Alliance forming was a strong step. You have the big Cisco step: Cisco Hosted Small Business (HSB) Communications Solution. The ADTRAN alliance with Polycom. Upstarts like ifbyphone and Twilio adding communications apps to the cloud. And The Cloud is certainly buzzing.

The problem is that the sales forces are made up of Bell-Heads. You can't sell apps - and Hosted PBX is an app - with Bell-Heads. It isn't plug and play. Cloud computing, SAAS and Hosted PBX are going to require a Net-Head who can visualize the application and how the business will best leverage it. It's an entirely different sales process to sell IP Communications.

It's just too easy for a company to sell SIP Trunking as a replacement for a PRI. Cost savings! Yeah! But how far does that get you? Less revenue and you didn't really help the business. As I have said before, it's time to do more than Me2.  And Broadsoft is going to need its customers to let go of TDM to embrace the promise of IP Communications. (How old is Internet Telephony? And we have yet to see that promise hit mainstream - yet).

Overall the VC's and stockholders probably weren't thrilled with the IPO today, but these are strange economic times. And now the heavy work begins of showing Wall Street growth every quarter. (I'm here if you need me).

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