It seems reasonable to assume that Vonage Holdings Corp.’s overhyped and undervalued IPO soured investors on other telecom companies. But while it hasn’t helped anyone else, the Vonage situation also hasn’t hurt as much as it could have, private equity partners say.
That’s because long-term, experienced investors saw through Vonage’s pure-play business model and stayed far, far away, says Matt Niehaus, a partner at Battery Ventures, adding that was the right move. “I personally have never gotten very excited about that business because there’s no sustainable competitive advantage,” he explains.
Vonage had unique legal and ethical problems that separated it from the pack, says Rod Randall, senior managing director of Vesbridge Partners.
There are the patent infringement claims — in the most publicized case, Vonage lost to Verizon Communications Inc. earlier this year. Investors, many of whom were customers, filed a class-action lawsuit against Vonage for its terrible IPO; and the company has been sued by subscribers for misdirected 911 calls that resulted in three deaths.
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