VoIP seems to have taken a beating lately, what with eBay saying it overpaid for Skype Technologies, SunRocket closed down earlier this year and ongoing patent problems at Vonage. But VoIP continues to remain an area for investment. Witness the fact that Louisville, Ky.-based Chrysalis Ventures, which focuses on young growth companies in the South and Midwest, recently led a $2.5 million equity funding in SinglePipe Communications Inc. Meritus Ventures also participated. The funding for SinglePipe, a Lexington, Ky.-based provider of residential and business VoIP services, was on top of a $4 million Series A round, led by Chrysalis, in January.
I chatted with Wright Steenrod, principal of Chrysalis Ventures and member of the SinglePipe board.
Q: What does this deal say about the future of VoIP?
A: I’m not an expert on Skype or SunRocket, but I think VoIP has a bright future. First, we need to stop talking about this business opportunity in terms of the VoIP market. SinglePipe is a communications company that uses digital technology to offer its customers—both small and mid-size businesses and consumers—a more convenient, richer phone service for less money than they are paying now. Customers don’t care if it is VoIP or two cans tied together with string. Customers want a phone service to meet their needs.
As far as the technology goes, the company is seeing opportunities to provide this service with digital technology but also with hybrid technologies that combine traditional telephone technology with digital technology.
Q: How is SinglePipe different?
A: We approach the market differently from the companies you mentioned. While some companies appear to have problems, Cox and Comcast are having a lot of success selling digital phone service to their customer. SinglePipe partners with smaller market cable companies who may not have the expertise or resources of a Cox, but want to provide digital phone to their customer base.
Q: Will the funding be used for an acquisition?
A: We are opportunistically looking for acquisitions, but the money will be used primarily to further the company’s organic growth. When Chrysalis first financed the company, we knew the company would need more money and planned it as a tranched investment. This was a planned extension of the Series A round.
Q: What’s the exit market look like for VoIP? In other words, what would a good liquidity event look like?
A: It is still too early to tell because many companies in this space are still developing, but we expect to see venture returns from SinglePipe.
Q: Chrysalis focuses on the Midwest and South. What do you think will draw more VCs from Silicon Valley and elsewhere to the region?
A: At Chrysalis, we have proven that we can find attractive deals with good teams in this region. Other firms may overlook the region as ‘flyover’ country, but we continue to see great opportunities. The perception is that many firms have had success investing in companies they can drive to from their office. At Chrysalis, we’re focused on finding the best deals throughout our target region. We have a 14-year track record that speaks to our ability to do just that.