Jajah acquisition by Telefonica shows how to make money in VOIP
Today’s announcement that Telefonica / O2 is acquiring Jajah gives hope and renewed strength to all entrepreneurs interested in the voice space. You can read about the deal in TechCrunch and Gigaom and also check out Larry Lisser‘s and Andy Abramson’s (quite implicit) post. My key takeaways from this deal are:
- The voice space is starting to get the heat and attention that it deserves. As Lee Dryburgh would put it, we are “experiencing the drastic change of the multi-trillion dollar telecom industry (a death) and for portraying an equally big new opportunity space (a birth). I sincerely believe that over the long term the underpinning (i.e. telephone calls, termination fees etc.) of this multi-trillion industry will seep away.” The smart telcos are noticing this and becoming the acquirers… great, but I am hopeful that we will see 1-3 companies over the next 5 years make it through an IPO and use their liquidity to truly disrupt.
- The original approach of VOIP companies like Vonage and Packet 8, while interesting, is not going to lead to massive change or disruption. These companies focused on selling a familiar product (dialtone, Netcentrex style PBX) powered by VOIP as a way to lower the price point. Instead, companies like Ribbit, Grandcentral/GV, Voxeo, Twilio, Nimbuzz and now Jajah deconstructed these old fashioned products and rethought what could be done in telecom when you mixed the web and the phone. Each of these companies has a shot at true disruption.
- The true value of VCs comes from their ability to produce bidding wars among rich giants. This is why a first-tier VC is worth much more to the entrepreneur than any other tier. It’s the VC’s job to sell the business. It’s the entrepreneur to grow it and make it all shiny before the sale.
- Somebody always gets screwed, and the techie takes more chances. As a CTO type, I hate to see Jajah’s CTO and his team get a different deal. As Martin Varsavsky recently blogged (sorry, in Spanish), sometimes investors get together with one founder to boot another, but I don’t really know what the answer to this is, other than pick a cofounder with morals.
Congratulations Jajah team!