Consider a typical speakerphone conversation in which approximately 10% of the words coming from the other end are indecipherable. Then multiply that figure fivefold and you can begin to appreciate the frustration felt by users of most Internet-based voice technologies.
“When most people think of voice over IP, they aren?t excited by it because they don?t want half of their words clipped off on the back-end,” said Rob McCormick, chief financial officer with Vpacket Communications.
Adopting that very hesitation as its primary selling point, Vpacket is in the midst of raising approximately $50 million in a third round of venture capital financing. The Milpitas, Calif.-based company has developed a non-ATM-based technology designed to eventually provide broadband conversationalists with the same clarity and service they have come to expect from traditional telephony.
“We?re a communications equipment manufacturer that develops integrated voice and data service platforms,” said Abraham Wei, co-founder and chief executive of Vpacket. “We allow service providers to deploy voice and data service on the same line by focusing on new broadband IP networks.”
And he?s had no shortage of VC interest.
On Tuesday, the company closed on a $23 million first tranche led by an investment of around $10 million from NIF Ventures/Daiwa Securities Group. Previous backers New Enterprise Associates (NEA) and Nexus Group also participated in the initial closing.
The NIF Ventures commitment signifies more than just capital. Indeed, it signals Vpacket?s interest in expanding into the Asian market.
“We?re one of the largest investment banking firms in Asia and we?ll certainly be working to fund Vpacket distribution channels and customers,” Jim Timmons, managing partner with NIF Ventures. “Japan especially is a very hard market to penetrate unless you have an inside player.”
Strategic partnerships will continue to be a theme in Vpacket?s second Series C close, as it is looking to bring on a handful of technology companies to help both secure customers and validate the firm?s technology. Desired investors have already been identified and the company hopes to seal the deal within the next 60 days.
The third round is designed as a mezzanine offering, pending improving market conditions. At the very least, McCormick said the incoming financing should eventually help the company achieve a positive cash flow.
Vpacket raised $2.5 million in a Series A round led by Al Shugart International (which is expected to come in on the second Series C tranche) and $14.7 million in a second round transaction led by NEA.
Dan Primack can be contacted at Story Feedback.