2004 Fierce 15
AND THE 2004 WINNERS ARE
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Today I am pleased to announce our first annual edition of The Fierce 15, a special issue of FierceVoIP featuring our list of the top emerging IP telephony companies of the year. We examined over 300 emerging VoIP companies and solicited the advice of industry experts, weighing their thoughts and recommendations against our own analysis. We purposefully avoided large, well-known companies, focusing instead on rising stars.
The VoIP industry has evolved rapidly over the past year, becoming the "disruptive" force the technology's supporters have long promised. In 2004, VoIP finally shed its status as an "alternative" voice technology and began solidifying its position as the new emerging global telephony standard.
VoIP companies are growing up with the industry. Many VoIP firms are rapidly transitioning from ragtag startups into established global businesses. Simultaneously, a growing number of giant telecom and cable operators are moving into VoIP, attracted by the scent of profit and the realization that the days of POTS and circuit-switched technology are numbered.
It is at this pivotal moment in VoIP's history that we present our first class of The Fierce 15. Arriving at just 15 companies in such a fast growing and rapidly expanding industry wasn't easy. We looked at scores of firms in a variety of fields, including services, monitoring and testing tools, network hardware, Quality of Service (QoS) assurance, media convergence, and other key areas. Some companies didn't make the cut because they were too new, too small, or inadequately funded. Others were excised from consideration by the fact that they had grown into mature, mainline businesses.
Considering VoIP's rapidly shifting environment, we looked for growing companies that could simultaneously weather a storm and sail ahead at full speed. That's because today's VoIP trendsetters need to be both sturdy and nimble to face challenges looming on several fronts, including threats posed by technology, regulation, taxation, cutthroat competition, and public skepticism.
It is that last challenge that might be the most difficult one for VoIP companies to surmount. After all, we are only a few years removed from the Great Internet Bubble, and more than a few seasoned business and financial observers fully expect the entire VoIP industry to suddenly burst. It's hard to raise capital and grow when pundits are predicting your imminent demise.
While the VoIP business is likely to experience consolidation sooner rather than later, we believe that The Fierce 15 are better positioned than most industry players to survive the upcoming storm. The companies that made this year's Fierce 15 all have several characteristics in common, including intelligence, agility, great products or services, fresh ideas, solid management, and, most importantly, market leadership. These companies will be the dominant players in the VoIP market in the next few years. Put simply, they are all fierce, and we have a lot of faith in them.
8x8
Based: Santa Clara, CA
Founded: 1987
www.8x8.com
Why It's Fierce: 8x8 isn't content to exist just as a low-cost VoIP service provider. The company sees IP telephony in its true form: as a full-fledged and revolutionary 21st century communications medium with boundless potential. Through services like Packet8 Videophone, which gives users high-quality audio and full-motion video service, and Packet8 Virtual Office, which allows users anywhere in the world to group multiple lines into a virtual business telephone system, 8x8 sees the future of IP telephony and is ready to take advantage of it.
What to look for: More interesting variations on IP-based communications.
BridgePort Networks
Based: Chicago
Founded: 2002
www.bridgeport-networks.com
Why It's Fierce: VoIP's next great leap will be into the mobile space. Bridgeport is poised to take advantage of this opportunity by producing software that interconnects cellular and corporate networks, enabling mobile phones to run on VoIP. Besides trimming mobile phone bills, the technology will allow employees to use their phones while overseas simply by plugging the handset into a computer and then using the Internet to make the call. BridgePort Networks last month secured $25 million in second round funding, after closing $10 million in financing in October last year. BridgePort's software is being tested at several large phone companies, and it hopes to announce its first deals later this year.
What to look for: BridgePort will end testing of its products and shift to sales. Look for BridgePort to sign partnerships with at least one major carrier or service provider by the end of next year.
Brix Networks
Based: Chelmsford, MA
Founded: 1999
www.brixnetworks.com
Why It's Fierce: When it comes to VoIP Quality of Service (QoS), enterprises, VoIP startups, and traditional phone and cable companies all want to get the biggest bang for their buck. Brix is only to happy to oblige. The company has carved itself a significant market niche by providing real-time service assurance and performance management solutions that verify the quality of VoIP offerings. The company's hardware and software products enable users to manage the quality and reliability of their offerings. Brix has raised $55 million in four rounds of financing, including $8.1 million in the fall of 2003. The company's backers include Charles River Ventures, ComVenutres, Fidelity Ventures, Partech International and STAR ventures. Brix's diversified customer base includes Qwest, Verizon, Comcast, Net2Phone, the US Army, and the US Defense Information Systems Agency.
What to look for: A shot at profitability in the first half of 2005.
CosmoCom
Based: Melville, NY
Founded: 1996
www.cosmocom.com
Why It's Fierce: VoIP isn't only about person-to-person phone calls. A growing number of contact centers, ranging from credit card companies to travel services to catalog retailers, are adopting IP telephony. CosmoCom targets these enterprises with CosmoCall Universe, a unified IP contact center suite that includes multi-channel ACD, email response, interactive voice response, computer-telephone integration, predictive dialing, multimedia recording, and administrative tools. Network service providers use CosmoCall Universe to offer hosted contact center on-demand services to their clients. CosmoCom has a particularly strong telecom market customer base. The company's customers include BT, Cable & Wireless, Deutsche Telekom, France Telecom, NTT, and Japan Telecom.
What to look for: More customers, new partnerships, and a market presence in more countries.
Edgewater Networks
Based: Santa Clara, CA
Founded: 2002
www.edgewaternetworks.com
Why It's Fierce: Edgewater wants to make VoIP networks at least as secure and reliable as the PSTN. To this end, the company has developed a line of products that are designed to make the deployment of voice and video over IP easier, less expensive, and more secure. Deployed at the customer's premises, the firm's EdgeMarc appliances provide a demarcation point for real-time, interactive IP services. The products include a SIP, MGCP or H.323 VoIP firewall, VoIP survivability, passive call quality monitoring, and powerful but easy-to-use traffic management that ensures toll-quality voice. Edgewater's EdgeProtect session border controllers protect managed VoIP service providers from network-based attacks and extend the reach of VoIP services with NAT/FW traversal. All in all, Edgewater provides the technology an enterprise or service provider needs for a safe, secure, and reliable network.
What to look for: More business opportunities and more competition from other converged network appliance makers.
InfiniRoute Networks
Based: San Francisco
Founded: 2004
www.infiniroute.com
Why It's Fierce: A good idea can take a company a long way in the VoIP industry. InfiniRoute's good idea is a carrier-neutral VoIP peering service. The company's Managed Voice Platform (MVP) provides an interconnection infrastructure that allows carriers to quickly and easily exchange VoIP traffic with global partners without the burden of capital investment or the complexity of interworking between competing VoIP standards and protocols. In essence, the company seeks to help carriers quickly migrate interconnections from legacy TDM to direct VoIP interconnections without major capital investment and the required integration of VoIP equipment and software. In VoIP, anything that can save carriers money is a good idea. InfiniRoute was created through the merger of two start-ups: IP Deliver, which provided VoIP network management services, and Proficient Networks, which offered an IP network monitoring and maintenance platform. InfiniRoute investors include BV Capital, Canaan Partners, and El Dorado Ventures.
What to look for: Expect InfiniRoute to announce at least one major carrier or service provider trial.
Natural Convergence
Based: Ottawa
Founded: 2001
www.naturalconvergence.com
Why It's Fierce: Natural Convergence works behind the scenes to supply hosted VoIP capabilities to service providers that target small businesses. The company's solution is hosted in the carrier's network and delivered to the user's desktop using pre-existing networks and cost effective IP phones, thereby replacing the customer-owned key system or PBX. The approach delivers on the promise of the converged network by enabling both voice and data services to be carried over any broadband data connection. The bottom line is a highly differentiated, flexible, and profitable VoIP service that carriers can offer their small business customers as part of an overall services bundle. Natural Convergence is backed by VIMAC Ventures, Jefferson Partners, BDC Venture Capital, Desjardins Venture Capital, Primaxis Technology Ventures, and Purple Angel.
What to look for: Natural Convergence's real threat comes from the possibility that carriers will develop their own VoIP solutions for delivery to small business customers. If they can survive this, they have a chance at winning this potentially lucrative market.
Netcordia
Based: Annapolis, MD
Founded: 2000
www.netcordia.com
Why It's Fierce: The key to ensuring a high Quality of Service (QoS) on VoIP networks lies in careful and continuous monitoring. That's what Netcordia promises its customers. Netcordia NetMRI appliances allow customers to watch voice traffic on wired and wireless IP networks. NetMRI's VoIP module automatically determines the quality of IP phone calls by evaluating call data records (CDRs) for delay, jitter, and dropped packets. The product correlates abnormalities with contributory network events and provides detailed reports. The VoIP module also assesses whether an existing IP network can support VoIP. Using Cisco's SAA protocol, which is built into most Cisco routers and switches, the VoIP module can simulate voice traffic to evaluate VoIP viability based upon measured QoS metrics. Unlike competing technologies, NetMRI eliminates the need to use probes or external devices.
What to look for: As QoS becomes a more important issue for VoIP service providers, Netcordia's stands a good chance of winning key carrier and enterprise deals.
Nuvio
Based: Kansas City, MO
Founded: 2003
www.nuvio.com
Why It's Fierce: The secret to Nuvio's success lies in thinking small -- as in tapping small ISPs and other businesses that can repackage its VoIP services. While many leading VoIP service providers are targeting cable companies and global enterprises, Nuvio is developing, licensing and marketing VoIP services to consumers, businesses, educational organizations, and government agencies through a growing network of partners. The company is busily establishing relationships with broadband providers, network integrators, and technology resellers and retailers. The "instant VoIP" strategy provides Nuvio's partners with a fast entry into VoIP as well as marketing support, a branded Web site, private label billing, referrals coordination, and private label phone support. Nuvio's offering is based on a proprietary telephony softswitch that is coupled with gateway servers located across the nation.
What to look for: Nuvio will work hard to find and retain partners that can help it better compete against the telecom giants.
Qovia
Based: Frederick, MD
Founded: 2002
www.qovia.com
Why It's Fierce: As VoIP becomes ingrained in the telecom mainstream, service reliability and quality grow increasingly important. For many service providers and enterprises, Qovia's software is the tool that's used to tend to their network's health. Qovia's VoIP monitoring and management products offer reliability, emergency services, quality, operations, and security for enterprise Internet telephony systems. The company's flagship Qovia VoIP Monitoring and Management System (VMMS) consists of a series of software tools that significantly ease management, monitoring, and maintenance of Internet phone systems, protect data assets, and increase the productivity of IT investments. Qovia serves the voice community in much the same way that IBM Tivoli and HP Openview provided critical data network monitoring and management in the early 1990s. Qovia received $16.1 million in venture funding this year from Canaan Partners, Nokia Venture Partners, Anthem Capital, and the State of Maryland.
What to look for: Qovia's next goal is to develop products that block spam over Internet telephony (SPIT). The firm has already filed patents on two anti-SPIT technologies and hopes to use them to help sell its platform.
Quintum Technologies
Based: Eatontown, NJ
Founded: 1999
www.quintum.com
Why It's Fierce: Risk is a big worry for enterprises contemplating a move to VoIP. Quintum wants to take the fear out of migration. The company has distinguished itself in the VoIP industry with its Tenor switches, which are designed to help businesses of all sizes achieve a risk free transition to a converged network. Quintum's Tenor product line offers a wide range of unique features that differentiate it from other VoIP solutions. These features include real time PSTN failover, which eliminates risk from poor IP Quality of Service; MultiPath call routing that allows easy installation into existing data and telecom environments; and transparent communication across network address translation (NAT) firewalls. Quintum's patented technology monitors calls for jitter, packet loss, and latency, and automatically and transparently changes network connections mid-call whenever conditions demand.
What to look for: Quintum will have to keep innovating to fend off competitors offering lower priced products.
sentitO Networks
Based: Rockville, MD
Founded: 2000
www.sentito.com
Why It's Fierce: On the basis of its Open Network Xchange (ONX) suite of VoIP infrastructure products, sentitO has become a major player in the network equipment field. The firm has risen to prominence by offering the key pieces necessary to a VoIP service rollout, including switching, signaling, and service creation technologies. Powered by sentitO's patent-pending ElasticEdg technology, the carrier-class ONX helps service providers scale voice traffic and services to secure more customers and revenue. A shake-up in March saw sentitO reposition itself as less of a telephone switch vendor and more of a VoIP equipment player. The company is flush with cash, having raised some $28.5 million since late last year and $53.5 million since its inception. The firm's investors include Mid-Atlantic Venture Funds, Kodiak Venture Funds, Technology Venture Partners, Telus, Core Capital Partners, and InflectionPoint Ventures.
What to look for: SentitO will continue to focus on carriers that have aggressive plans to deploy VoIP technologies.
Skype Technologies
Based: Luxembourg
Founded: 2003
www.skype.com
Why It's Fierce: Every now and then a company comes along with an idea that's not only good and marketable, but that captures the spirit of the moment. Skype (a made-up name that rhymes with "tripe") is such a company. Leveraging peer-to-peer technology to power a free PC-to-PC VoIP service, Skype attracted nearly 10 million users in its first year of operation. The company has also added links to landline and mobile phones and now supports mobile devices, allowing Internet calling from wireless hotspots. Skype is currently the easiest, fastest, and cheapest way for individual customers to begin using VoIP. While running, the software resides in its own window, like an instant messenger program, allowing you to chat with other users. If the other person has Skype installed, you can talk as long as you want, free of charge, and with sound quality that is significantly better than that of a normal phone connection. Skype represents network economics in the purest form: free connections within the network become more valuable to each user as more users sign up. Because of the system's peer-to-peer design, loosely related to the Kazaa file-sharing program that Skype's co-founders invented four years ago, the system scales well.
What to look for: Look for Skype to launch new paid-access services that will boost its revenue.
Ubiquity Software
Based: Newport, UK
Founded: 1993
www.ubiquitysoftware.com
Why It's Fierce: SIP has rapidly supplanted H.323 as the protocol of choice for VoIP application developers. Ubiquity has ridden the success of its SIP Application Server, one of the industry's first SIP-based application servers, to become a major force in the communications software market. Ubiquity designed its application server to have high standards in redundancy and availability, as well as the ability to process thousands of calls in real time. The company's technology allows service providers to rapidly deploy a wide range of SIP-based real-time communications services across IP networks using technologies from the Web model of application development. Ubiquity has received $52 million in venture funding from CapVest Equity Partners, Wesley Clover, JK&B Capital, and Alcatel.
What to look for: Expect the company to forge new service partner alliances.
Vonage
Based: Edison, NJ
Founded: 2001
www.vonage.com
Why It's Fierce: There are many VoIP service providers -- the number grows almost daily -- but Vonage is the fierce startup that is best positioned to fight the traditional telephone companies and cable operators. Vonage claims it controls about 50 percent the consumer and small business VoIP markets. That's not surprising, given the company's name recognition and the marketing alliances it has formed with retailers, including Staples, Office Depot, RadioShack, Circuit City, and others. Vonage is expanding its presence in the US, UK, and Canada while planning service in Asia and Latin America. The company currently has 240,000 lines in service and is adding about 25,000 new lines per month. To solidify its base, Vonage is moving rapidly into wireless networking by forming partnerships with hardware vendors Linksys and Netgear. Vonage is also well positioned financially to take on any comers: investors have pumped over $200 million into the company's coffers in four rounds.
What to look for: Vonage will have to fight to maintain its lead and market share in the face of rising competition from telecom and cable giants. Look for Vonage to try to leverage its new WiFi partnerships with Linksys and Netgear to boost adoption within the home and SOHO wireless networking markets.