A group of tech heavy hitters have invested $100 million in an Internet
conference-call start-up, effectively putting their money where their
collective mouth is.
VStream, just over a year old, is one of a growing number of Web start-ups
looking to erase the line between traditional telephone services and
Internet-based communications. The firm offers online conference call, voice
email and other multimedia services primarily to small-business customers.
"What this [investment] does is allow us to realize our vision of a
convergence between the phone and the Internet," VStream chief operating
officer Jim LeJeal said. "This allows us to aggressively pursue our model."
VStream tomorrow will announce that firms including Excite@Home, Intel,
Panasonic and General Electric, among others, have invested $100 million in the
VStream's core service, dubbed "NetCall," takes a traditional conference
call and streams it over the Internet. Callers can listen either on a
phone or through their PC speakers, while potentially watching an online
slide presentation operated by the call's moderator.
Another service called "Beep" lets users send free voice mail over email.
Other products let users send slide shows with a recorded narration over
email, or post video and other multimedia presentations online.
But the company has considerable competition in the business messaging
market. Big telephone companies already dominate the conference call
business, and companies like US West and AT&T have been vocal about trying
to merge their phone and Internet operations.
Other Net rivals like Contigo and WebEx have also
received funding in the past. Some Web conferencing firms also provide
extensive free services.
Nevertheless, the financial endorsement provides a substantial boost to the
VStream already has attracted some valuable customers, like Microsoft, 3Com
and Level 3 Communications, and it says it logs about 1,000 active users
monthly. Revenue, executives say, is growing by 40 percent each month. But
the firm still needs to establish its brand before it hits the big time,
"I think they have a very thoughtful and unique business model," Cahners
In-Stat analyst Kneko Burney said. "But they're early. They're going to have
a tough eight- to 12 months ahead of them."
The trouble, some analysts say, is that VStream is looking for mass-market
acceptance, marketing to the small office and individual corporate user
before many are even comfortable with using the Web for voice calls. By
contrast, companies such as Envoy i-Con that focus on higher-end corporate
projects might draw smaller customer bases, but they claim higher initial
Tomorrow's investment round will likely allow the company to extend its
strategic partnerships, adding its voice services to partners' Web sites.
Already it provides voice greetings included in Web cards sent by Blue
Mountain Arts, the Net greeting card company recently acquired by
The company says it plans to use the new funds for marketing purposes and
for network expansion. To date, however, it has done little on the marketing
front, LeJeal said.
Cahners In-Stat's Burney said that Vstream, if successful, could be an
attractive takeover mark for one of the big local phone firms that have
traditionally been the leaders in conference call services.
"I think in a year, if things take off, they might be a takeover target for
an AT&T or an MCI WorldCom," Burney said. "It would make a lot of sense for
them to own the network their calls are using."