Google acquires portfolio company Gizmo5

Congratulations to Michael Robertson and team at Gizmo5 for all of their hard work and perseverance!  Gizmo5-Google-mm There is not a lot I can tell you about the future plans for Google Voice, but I do believe it is important to look back to see how we got here.  We made our investment in Gizmo5 (aka as sipphone and gizmo project) in early 2006.  What Michael and I shared was a vision of openness for the VOIP and IM World.  As I wrote on a blog post in January 2006, consumers want what Google and Gizmo5 will hopefully provide in the near future:

At the end of the day consumers don't care about protocols, they just want it all to work seamlessly and easily, and they do not want to be on their own island for communications.  What I want is one identity or phone number that works on any IM network, VOIP network, or even integrates with my PSTN and cell phone identity? 

Between 2006 we definitely had some ups and downs but through it all two big decisions helped us get here today.  First, we drastically cut the burn rate before the nuclear winter and decided to focus on getting to breakeven.  Being capital efficient and reliant on viral marketing certainly helped us grow our business and stay lean and mean.  Secondly, when Grand Central came out with their single phone number we decided to integrate Gizmo5 into their service.  Of course since both Grand Central (now Google Voice) and Gizmo5 were SIP compliant and based on open standards it certainly made that process quite trivial and easy. 

Fast forward 3 1/2 years to today, and all I can say is that I look forward to seeing what Google Voice will bring into the future and whether true openness can trump Skype's proprietary protocols.  It also seems like the vision of one number for PSTN, VOIP, or cell identity I wrote about long ago will become a reality.  One last thanks goes out to Maurice Werdegar and the team at Western Technology Investments (WTI) who provided Gizmo5 with venture debt and worked closely with us in the tough times to restructure our payments.  I would work with these guys any time.

Open vs. closed networks and Facebook chat

As you know, I have always been a believer in open standards (see my post from January 2006).  Being a market leader, it is quite easy for Facebook to create their own standard similar to how every other instant messaging network was started.  And to that end, Facebook started down that path.  But just today, it announced that it was extending its chat and opening up its service by offering XMPP/Jabber support.  Assuming there are no restrictions, this is a huge win for openness.  Maybe one day Skype and MySpace and others will adopt the same strategy and move us to a world where we can IM anyone from any network and have one IM identity rather be forced to live in a world that was similar to the dark ages of email where Prodigy, Compuserve, and AOL users could only communicate with users on the same network.  Once Facebook starts with chat, maybe when and if it ever offers VOIP, it would leverage the open SIP standard as well. Rest assured that the development team at portfolio company Gizmo5 is digging into the details of the Facebook annoucement and in short order can offer seamless connectivity to Facebook chat from your mobile phone.  From the day Gizmo5 was started, it was built to live in a world of open standards leveraging the SIP protocol for VOIP and Jabber/XMPP for IM and Presence.  As you might imagine, the smaller networks who needed users were the ones to adopt open standards first.  Slowly but surely, larger and larger networks have adopted these standard starting with Google Chat in 2006 and now Facebook with its dominant market share in social networking.  It seems as if the floodgates are opening and this is quite exciting.  As I mentioned in my post from 2006:

Whatever happens it will be interesting to see if true open standards will triumph over closed and proprietary and how long that will take. At the end of the day consumers don’t care about protocols, they just want it all to work seamlessly and easily, and they do not want to be on their own island for communications.  What I want is one identity or phone number that works on any IM network, VOIP network, or even integrates with my PSTN and cell phone identity?

Skype down…try Gizmo Project

I am sure there are alot of you who are frustrated Skype users since the service has been done over 24 hours. To be fair, the company has done a great job leading the marketplace with user signup and an incredible job with uptime of its network. Yes, this has been a pretty huge outage which is not fixed yet, but they were up for the last four years with very few problems. As an investor in Sipphone, creators of Gizmo Project, I have always believed that our opportunity was to create a next generation carrier for VOIP and IM traffic leveraging open standards like SIP and Jabber to allow any device (mobile, Palm Treo, computer, etc.) or web application to easily integrate our service. To that end, we have put alot more emphasis over the last 18 months on the mobile opportunity as you can see from our client that works with Nokia devices and Palm Treos. I assure you that we will have more to come in the next couple weeks with respect to our mobile strategy and expansion of our device support. Despite the fact that our emphasis has not been on the desktop, Om Malik points out that Skype’s problems, have been Sipphone’s gains:

The company saw a 400% increase in traffic this morning, with 4 times increase in sales, calls and downloads of its Gizmo Project software. “It is interesting to see that voice callers are transitory,” Michael Robertson, founder, SIPphone wrote in an email.

So if you are still a frustrated Skype user, give Gizmo Project a try on your desktop or mobile device where you can not only communicate with any SIP or Jabber user but also do metaIM with AOL, Yahoo, Gooogle, and MSN users as well.

Nice Try T-Mobile

OK, I am biased since I am an investor in Sipphone/Gizmo Project but this service from T-Mobile sounds pretty lame.  The "breakthrough offering" from this carrier is that you can make calls on your mobile handset and seamlessly switch between T-Mobile’s cellular network and your home network.  The catch is that you have to pay an extra $20 a month to use the service and you are locked in to using your home network or in the future a T-Mobile hotspot.  Unless you are making tons of international calls from home, that doesn’t sound like a breakthrough.  You are better off saving that $240 annually and using that to buy a Nokia n80 or n95 device which has dual mode capabilities but in a completely open format.  OK, it doesn’t offer seamless handoffs between cellular and wifi but it does allow you to make VOIP calls from any wi-fi network and all you have to do is buy minutes from GizmoVOIP which is integrated in the  phone.  In the near future consumers will be able to leverage the full power of web-based communications as presence, IM, and buddy lists get built into the device.  Once again, I know that carriers have to protect their huge investment in infrastructure, but how long will consumers stand for exorbitant pricing on closed networks?

Dual mode phones – convergence of cellular and wifi

I have seen the future of VOIP and it is not about making calls from a headset on my computer or buying a new VOIP phone to carry around with me – it is seamless integration of VOIP with your existing cell phone, it is one device which gives you the flexibility to make calls on either network depending on coverage,reception, and cost, it is the new Nokia N80 dual mode phoneNokian80about I just got a demo phone last week from my portfolio company, Sipphone (developers of Gizmo Project), who happens to be the VOIP service provider for these devices.  Sure, there are some kinks to work out, but what is great is that the Internet calling is seamlessly integrated into the user experience.  Take a look – when I dial a number I have the opportunity to either make a regular cell call or internet call.  I don’t have to go to a separate application on my phone, I just make a call – it is that simple.  Scr27sm_3 Even better is the integration of the service with my existing Gizmo Project desktop client.  When a contact makes a Gizmo-Gizmo call and if I am logged into the existing wifi network on my Nokia N80, my phone rings. I can choose to take the call on my device instead of being locked at my desk.  I have my regular cell number and my online identity all on one device.  This is truly disruptive technology and is just the beginning of what I believe is going to be a myriad of devices offered by manufacturers which will integrate cellular and wifi.  While TMobile’s annoucement last week is a great step in this direction, it is still based on only using TMobile’s special router and their existing hotspots and cellular service.  In other words, it is closed and not an open opportunity for customers to use whatever VOIP service or wifi network.  As we all know our handsets are minicomputers so why not be able to make regular cellular calls but also take our music, pictures, video, and even our online identity with us all the time?  As wifi networks proliferate and as more features get built into the N80 and other new devices like presence and VOIP over wifi people will truly have no boundaries to reach their friends and colleagues anytime and anywhere at minimal cost. By the way, notice the VIdeo Call icon on the screen shot above – that is going to happen sooner than you think, especially for wifi-to-wifi but also depending on the 3G bandwidth of your current cellular carrier. 

Free phone calls!

Sipphone (full disclosure-my fund is an investor and I am on the board), developers of Gizmo Project, made a bold move yesterday offering users free calls to mobile and landlines in over 60 countries.  It is akin to the old MCI Friends and Family plan where customers could call other MCI customers for free.  This is viral marketing at its best.  Similarly, in order to take advantage of our offer, any Gizmo Project user can call any other registered Gizmo Project friend on any phone line in the 60 countries offered.  As Jim Courtney from Skype Journal says in his post:

The genius in this program is the attempt to drive market awareness virally by getting all your (PC- and headset-equipped) friends and family to sign up for GizmoProject and experiment with it. You then have the option of calling them at no charge; they can receive the call on either the GizmoProject softphone or their legacy PSTN phones.

There is lots of buzz in the blogosphere about this plan – some calling it great and others calling it a marketing gimmick.  Yes the free calls require both users to be registered to Gizmo Project but whether you call it a gimmick or not, I can already see some dramatic user signups in the last few days.  Michael Arrington from TechCrunch gets it when he says:

If calls continue moving towards free, then it’s going to be all about the value-added features. Video, better conferencing support, SMS – I can only imagine what sorts of features VOIP providers will be able to find substantial profit in. Perhaps these consumer VOIP services will have to make consumer VOIP a loss leader in exchange for building the strength of enterprise VOIP offerings. Ad supported free calls could be acceptable if the ads appear on the web interface. It’s hard to say what could take the place of burning through VOIP-out minutes, but interesting things will likely emerge.

As I have always thought, the price of phone calls has nowhere to do but down (and it has been dropping substantially over the last 5 years) and Gizmo Project is making a big move with its "free" offering.  As you might assume, the key to making our business model successful is the upsell of value added services and to continue to make sure we acquire new subscribers at the lowest cost possible.  From my perspective it all goes in the marketing bucket – would you rather spend money on silly television ads or pass on the low cost of telephony to your customers?   As Jason Droege, President of Sipphone told Om Malik,

“Wholesale PSTN rates are sooo cheap these days that it’s not much different than the cost of bandwidth back when I started,” says Jason Droege, chief executive of SIPphone, the company behind Gizmo Project. “In the last 12 months I’ve seen wholesale PSTN costs drop dramatically and I expect this to continue. ”

While Mark Evans has a point that the problem with our service is that at least one user has to remain tethered to the computer to make calls, all I can say is to watch for an upcoming product announcement in the next month or so which will change all of that.  In the meantime, enjoy your free phone calls!

For other perspectives see Silicon Beat, Andy Abramson’s VOIP Watch, and Engadget.

VOIP and IM World Update

Congrats to the Sipphone team (full disclosure-portfolio company and I am on board) for getting the Gizmo Project client out for the Nokia Internet 770 Tablet (see Andy Abramson’s blog for more on this).  Nokiascreen This is quite exciting as the company is executing on its vision and roadmap to extend its SIP and IM service to many devices and networks, particularly wireless ones.  Our other vision was to focus on standards-based interoperability for IM and VOIP.  To that end, the Gizmo Project 2.0 release allows users to have dual log-in from one soft client to either Asterix based PBXs or other SIP-based networks.  On the IM side, it seems that the world is slowly moving into the interoperability direction as Yahoo and Microsoft are in limited testing for federation of their respective networks and as LiveJournal added XMPP/Jabber based-IM to its network of 10 million users.  As Om points out, it will be interesting to see how federation in the IM and VOIP space continue.  As I have mentioned in the past, most of the number 1 players have no reason to federate, but I do believe as a number of smaller communities and networks spring to life, that the little guys will be able to federate and create a standards-based IM and VOIP service that rivals the larger players.  Doesn’t open standards win eventually?

VCs and VOIP

Here is a link to an article on VCs and VOIP (via Andy Abramson of VOIPWatch).  There are some VCs who think it it too crowded and others (like myself) who still see opportunities.  However, the one thing I was not pleased about is that the only quote the author uses for me did not include the rest of our conversation.  I should have just pointed her to my blog post from last September on the topic where I say that:

This battleground is about software and not devices which is why I believe companies entering this market from a telephone-centric view of the world will miss out on a big opportunity.

When I say, VOIP is "moving beyond Vonage" what I mean is that the opportunity is not about making and receiving calls but about how VOIP becomes seamlessly embedded in all applications, into the very fabric of the web.  Imagine seeing any phone number on a web page and clicking it to dial seamlessly.  Or how about being in your CRM application and knowing which of your sales reps are online as you are reviewing the pipeline and clicking to IM or call them through the CRM app.  When you call them, you have no idea if they receive the call on their home phone, computer, wifi device, or cell phone.  All you know is that they are available and that you can call them with one click.  This is the direction we are heading in – it will take time, but it will be interesting and it is certainly more than just a phone call.  If you want to learn more about this I suggest reading Alec Saunders from Iotum’s post on Voice 2.0.   As Alec says, :

In the voice 2.0 world any application, within the bounds of permissions set by the subscriber, can access presence; initiate, accept, and redirect calls; and query directories.

Alec gets it and this is certainly some of the stuff we have up our sleeve at Sipphone, developers of Gizmo Project.

Why we invested in Sipphone, developers of Gizmo Project

Dawntreader Ventures has just led a $6mm round of financing in Sipphone, its first outside round of capital.  We look forward to working with Michael Robertson and Jason Droege to fuel continued growth in the Sipphone and Gizmo Project service and to roll out new features and functionality.  As you can see from Michael Robertson’s blog, the basic premise of the company is to provide SIP-based dial tone to any software or hardware device.  For those of you who don’t know, SIP is a standard protocol for voice and video. 

Gizmo Project voice calling and IM is booming on Macintosh, Microsoft Windows, and Linux computers because Gizmo Project works well and connects with every type of device like WiFi phones, other VOIP and IM directories like GoogleTalk and even the popular open source Asterisk PBX software. I think people are beginning to understand the difference between Skype who walls their customers in and won’t play nicely with anyone and SIPphone who connects to everyone making it possible to have just one address. Next week SIPphone will announce closing of a major venture capital deal which will help the company grow even faster.

As you can read in an earlier post, I, like Michael, am a believer in the growth of open standards. We want to provide consumers with the ability to have one address and connect to anyone on any network.  We want to expose our APIs to allow anyone or any company to easily integrate our VOIP/IM service into any application or device.  In addition, we want to make it extremely easy for consumers to bridge the Internet and traditional PSTN by extending the SIP functionality to non-PC devices such as routers, wifi devices, adapters, and dual mode cell phones.

While there are a number of factors that go into an investment decision, these are the key highlights for us.  Sipphone has a strong team led by Michael Robertson (founder of and Jason Droege (founder of, first video search engine).  They know how to develop and market great consumer products and services on the web.  The market is huge as only a tiny fraction of overall global voice traffic is VOIP-based on the end-consumer side.  This is not a zero sum game between other VOIP/IM players but between the incumbents driving analog telephony and the new players driving digital subscriber growth.  Sipphone has demonstrated it has a winning product that can grow its user base and upgrade free users into paying customers for value added services and features.  The cost of sales and marketing is zero as Sipphone is a frictionless sale, especially when compared to a Vonage.  Finally, I believe that consumers are smart and demand interoperability and that open standards will win.

Google Talk Federation – open vs. closed

As you are probably well aware, Google just announced open federation with other IM services via XMPP (jabber).  It’s about time that someone did this.  Sure, the Trillians of the world are great to have as aggregators of networks but what I really want is ONE identity that is cross network, cross platform, and cross communications (voice, IM, email).  I remember in 1998 when David Wetherall was talking about the future he thought we would all have one identity and that it would be our email address.  Well, 8 years later it is clear that email will not be the one identity with massive spam issues but potentially with federation of networks it may be our IM/VOIM identity, one day.  To date, we have all been on our own IM island where only AOL users could talk to AOL users and MSN to MSN.  While early, Google is taking a step in the right direction as it makes no sense for consumers to have to choose which network to join.  It should just work.  Now Google and others are taking the first step to letting us have one identity and by leveraging open standards and integrating with other services like Michael Robertson’s Gizmo Project and Earthlink.  It will be interesting to see if this forces others to open up their networks to play the open standards trump card or simply remain closed and proprietary. 

The other interesting part of this announcement is that later this year Google will also support SIP  allowing for true interoperability between different VOIP networks that use the open standards SIP protocol.  Cisco uses SIP (proprietary version called SKINNY), MSFT uses a form of SIP in Live Communication Server, and open source telephony software like Asterisk and Pingtel (Sipfoundry) either leverage this protocol for VOIP communications or can connect to SIP-based networks (Asterisk).  In other words, many in the business world who have VOIP services have knowingly or unknowingly jumped behind the SIP bandwagon.  While true interoperability with these services does not completely exist since some hardware vendors have created their own versions of SIP-based technology, this does provide an opportunity for the SIP-based players to potentially end-around Skype by combining networks.  While Skype has been doing incredibly well and has a tremendous network advantage, will the fact that Google is getting behind SIP and open standards neutralize the proprietary Skype advantage over time?  Does open standards win out over time versus closed proprietary systems?  Skype has no reason today to be SIP compliant since it wants to protect its most valuable asset, the network, but will it over time look to offer a SIP gateway?  Whatever happens it will be interesting to see if true open standards will triumph over closed and proprietary and how long that will take.  At the end of the day consumers don’t care about protocols, they just want it all to work seamlessly and easily, and they do not want to be on their own island for communications.  What I want is one identity or phone number that works on any IM network, VOIP network, or even integrates with my PSTN and cell phone identity?  Keep an eye out over the next year for innovative services that will move closer to this reality-dual ringing computer and cell phones, seamless transferring of a conversation between networks, and more control over who connects with us and when.