Doug on IP Comm – An independent voice on VoIP, telecom, and IP Communication

ooma gets more cash

Posted on: June 23, 2009

TechCrunch says ooma has raised another $14 million, for a total of $56 million in VC money raised over the course of the company’s history.

Leading the round was Worldwide Technology Partners. and the deal reportedly wipes out (probably dilutes out) the other investors. TCrunch says that ooma was “really on the roaps and down to its last few dollars,” but sales at Best Buy are rockin’ and the company should reach profitablity with the newest round of financing.

No doubt ooma was really screwed up at first launch. The gear was too expensive ($399), the consumer message was confusing, and there was way too much Ashton Kutcher in the picture.

New management was brought on about a year ago and earlier this year CMO Rich Buchanan told me the company can’t ship product fast enough.  Buchanan is a big thinker and ultimately envisions selling millions of the units per year through outlets like RadioShack.  It’s a different mindset from the business VoIP community, for sure.

At first glance, I thought the ooma concept was a bit nuts, but when you walk through the business model — pay for the gear up front, around 5 years of phone service are baked into the price, make money off the value-added services and hardware upgrades — it starts to make a whole lot of sense.  There is a lot of processing firepower built into the ooma device (Linux-based OS with Asterisk on top) and the second generation Telo will support HD through G.722.

Consumer retail is the first distribution path for ooma, but there are some interesting plays to be made with white label (cable companies offering HD voice, anyone?) and the always-looming SMB market.

Advertisements

9 Responses to "ooma gets more cash"

I don’t get it. After 5 years in the business voip space with Junction Networks, I am confident the OOMA concept is not going to make it in the “always-looming SMB market for sure.

Depends on how you define SMB, Rob.

I think for the smaller and/or distributed businesses of 3-15 people, ooma and Vonage will come to play.

Our experience tells us otherwise. Neither of these services can handle simultaneous calls, they don’t have basic business features like extensions, directories, call groups, etc. and they don’t support open SIP calling.

They would have to make major changes in order to cater to a business crowd.

Who cares about open SIP calling?

Seriously, a small business owner isn’t looking for open SIP, he’s looking for cheap minutes. If you mean to tell me that the average mom-and-pop shop of a half dozen people cares about SIP, I’d be really surprised.

The SMB guy wants something that they can plug in, and it works. Preferably plugged in by a VAR/consultant.

You are also assuming that Vonage and ooma (and Skype, for that matter) are A) Not aware of what a SMB user would want in an offering and B) Wouldn’t go build those basic features themselves.

ooma’s hardware runs Asterisk on top of a Linux derivative. Just how much work do you think the ooma guys will have to enable that laundry list of features?

Actually, a decent % of our customers not only want SIP calling, but they want to host their SIP domain with us.

Further, they want to choose phones based on open standards, so they are thrilled that we support any SIP device, software phone, etc.

Are you suggesting that Ooma will turn the devices into Asterisk PBxs on site at customer locations? Aren’t there plenty of options like that out there today? If this is the end game for Ooma-SMB, then they are way behind in a crowded race.

Rob–

Ooma and Vonage don’t want your customers, unless you mean to tell me that the vast majority of your customers are mom-and-pop shops, SOHO, and some number of seats smaller than 25.

These are the guys that roll into Best Buy, Office Depot, Staples and/or Costco, buy something off the shelf, plug it in, and go onto their next problem of the day.

If they have more sophisticated needs, they’ve probably gotten a call from Cox Business or XO or somebody else, or have found a VAR to install.

What I suspect is that ooma is going to do is prep a bundle that’s preconfigured for the SMB/multi-line problem. And no, you can’t go into a Best Buy or an Office Depot and find “plenty of options” there.

Right now, you can buy an 8×8 solution — hardware and service — from Office Depot. You can go through Dell to get a Fonality solution, but that doesn’t have service bundled in. You could go to Costco to get a Microsoft Response Point solution, but it doesn’t have service bundled in and who knows what is happening with Response Point.

So, no, there aren’t “plenty” of options for a SOHO or smaller SMB to simply roll into Best Buy and do one-stop shopping.

OK. Some common ground! Yes, I agree there aren’t many options in the “walk in, drop in cart, bring home, plug in” category. So we are talking about a distribution matter. But I think there is a real reason for this condition. Businesses buy hardware in stores, but don’t like to buy services in stores, especially not mission critical communications services. You can’t put a bar code on services.

Ultimately, SMBs will go one of two ways:

1. Buy, install and manage on-premises PBX with connections to multiple providers.

2. Outsource. Buy phones only.

In both cases, the service provider and equipment vendors are independent. The underlying technology is so simple and standardized, vendor survival will only be possible with focus on one thing.

Being a service provider AND a hardware/software company is too much. That’s why Microsoft Response Point partnered with Junction Networks and other service providers. They recognized they are not service providers and aren’t trying to be everything for everyone.

[…] information: ooma gets more cash, ooma goes RadioShack – Over the counter […]

[…] would be buying advertising for the fall and bargains were to be had due to the economic recession. Ooma raised $14 million in VC funding in June, so it isn’t hard to guess where the money has come […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: