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IP telephony vendor VocalData snags $12.5 million in funding

Jul 21, 20035 mins
NetworkingVenture Capital

* VocalData, other start-ups get injection of venture capital

VocalData last week announced a new round of venture funding that will be put toward helping the company better meet the needs of carriers using its software to expand their hosted IP telephony rollouts.

VocalData has added $12.5 million to its total of $60 million in funding since being formed back in 1998. The latest funding round, the company’s third, was led by Austin Ventures and included others such as Seed Capital Partners and Trinity Ventures.

VocalData sells software that enables carriers to provide their customers with PBX features without the hassle and expense of owning and maintaining their own systems. The product line includes an application server, dubbed VOISS, that supports programs such as conferencing and unified messaging. Also in VocalData’s portfolio is proxy firewall technology that ensures IP telephony calls can get through to customers.

The company’s software runs on Sun Netra boxes. VocalData actually sold some hardware, including IP phones and gateways, at the start of its life but is phasing out hardware sales.

VocalData is sometimes lumped in with softswitch makers by industry watchers, though the company claims its technology actually complements softswitches. However, company officials acknowledge that their software can serve as an alternative to softswitches in some newer networks when the carrier cannot afford to buy a full-blown softswitch.

Danny Klein, a Yankee Group analyst, says VocalData competes with the likes of Sylantro, Broadsoft, Natural Convergence and VoxPath. “There is an immediate threat by Lucent’s iMerge product, but this solution leverages a Class 5 switch and is not ideal for an all-IP environment,” he adds.

Yankee Group says VocalData is going after a hosted IP telephony application server market worth about $61 million today and expected to hit $1.5 billion by 2007.

The company plans to use its new funds to expand its sales team, as VocalData evolves from supporting small deals to larger ones. Laurie Shook, the company’s director of marketing, says a typical VocalData deal today ranges from $100,000 to $250,000, though can reach up to about $1 million. But she notes that customers have begun moving from IP telephony deployments in one city to rollouts that span double-digit numbers of cities. The company’s biggest U.S. customer, ICG, has now rolled out IP Centrex services in 23 cities, she says.

The funding will also be used to help the company expand internationally. VocalData already does slightly more than half of its business in Asia, where Shook says nearly half of all voice-over-packet traffic can be found.

Another use for the funding will be bolstering the company’s engineering team. Much effort goes into ensuring that VocalData’s technology works with other vendors’ gear in carrier networks. Shook says the beauty of packet networks is that carriers can buy best-of-breed products, but the challenge is that all this technology needs to work together. She says VocalData supports key IP telephony standards such as Session Initiation Protocol, Skinny Call Control Protocol and Media Gateway Control Protocol, but that not all vendors do, and that implementations vary.

When asked about the company’s product direction, Shook says VocalData is in good shape on the speed and scalability front, noting that carriers can support up to 100,000 subscribers on a pair of servers running its software and that the software can handle up to 200 calls per second. But VocalData is looking to expand its software portfolio, particularly in such areas as mobility and desktop application integration.

VocalData for now is concentrating largely on carriers, though not so much on cable companies, even though they have begun to dabble in IP telephony. Shook notes that when the cable companies – mainly focused on residential customers – begin expanding their offerings for businesses, VocalData is more likely to start working with the cable companies.

“At least two of our customers have residential end users, but the vast majority of our customer base is focused on business end-users – it’s higher margin, and more apt to value the IP-based enhanced features,” she says.

Danny Briere, CEO of consultancy TeleChoice, says VocalData has a good reputation and he finds it not surprising that the company was able to obtain new money in what is still a tough funding environment.

“It’s a foregone conclusion that everything is moving toward [packet], and that makes it easier to get funding,” he says.

VocalData, which employs 80-plus people, was started by Steve Bakke, who serves as CTO. He previously started companies called CrossTies and Omation. He has surrounded himself with former colleagues from those companies as well as a smattering of industry veterans from vendors such as Lucent and Nortel.

Also in the money

It has been quiet of late on the funding front for service providers and their suppliers, but at least two other companies in this market announced recently that they have secured new money.

Atrica, a Santa Clara, Calif. maker of optical Ethernet gear for metropolitan networks, pulled in $17 million in fourth-round funding from Accel Partners, Benchmark Capital, Intel Capital and others. Atrica previously has raised $117 million in funding.

Separately, managed remote access services provider Fiberlink Communications announced it has secured $50 million in funding from Technology Crossover Ventures. Fiberlink – which is based in Blue Bell, Pa., and has been around for 12 years – says the money will go toward technology development, acquisitions and repurchasing some previously issued preferred shares.

Fiberlink partners with telcos to provide customers with access, then bundles in software for VPN, intrusion detection and other applications it offers on a service basis. The company claims to have racked up seven straight profitable quarters and double-digit quarterly revenue growth.