Tuesday, April 10, 2007

Red Herring: Vonage Could Kill VoIP Funding

"Vonage was ordered by a federal judge on Friday to halt adding new customers unless it can come up with a patent work-around, but the Internet phone company escaped being shut down altogether.

Even if Vonage survives its legal woes, its massive patent problems will shut off the flow of venture capital funds into the VoIP market, industry insiders said. In fact venture capitalists, who have pumped nearly $2 billion into VoIP, are concerned their current investments will go up in smoke.

“VCs are probably going to cut their losses and not fund VoIP companies anymore, but I think that would be a tragedy,” Yankee Group analyst Zeus Kerravala said. “I would hate to see innovation stifled because of this.”