FON Raises $9.5 Million

"We are happy to report that at Fon we have raised $9.5 million in a C round. Our current valuation which unfortunately I can´t disclosed has been the best valuation so far. This does not mean that we were not hurt by current market conditions which are pretty bad for start ups (Fon was founded in February 2006). Our leading investor in the round was a US Venture Capital arm of Sistema, Russia´s leading telco but our usual suspects, Google, British Telecom, Digital Garage and of course your blog writer participated in the round.

What are we going to do with the money? Launch Fon in Russia, launch the Fonera 2.0 (the fonera that uploads and downloads stuff to and from the internet while you are doing something else with your laptop) and develop the fonera 802.11n for an end of the year launch.

Unfortunately we will also have to do all this spending less money because this market forces us to do so. We already cut losses at Fon from $1.3 million per month to $800K per month in the last half year and we achieved this through cost reductions, a great reduction in router subsidies and increased revenues with high margins. We plan to do more of the same in the future and my target is to be losing half a million per month by June and to break even by the end of 09. And yes I do know that I should not be telling any of these things because we are a private company but if this blog is of any value to entrepreneurs I believe I must share them with you.

Bottom line: tough market forces you to think harder about everything you do but we are very happy to have closed this C round."

Well, this kind of money will hopefully help FON move on from their current slump. It will be nice to see how the Fonera 2.0 turns out, but I'm worried about the retail price of it is going to be. I have a feeling that the router is going to be a failure, it's going to be too expensive and still have only one LAN port. On the other hand, it will have a USB port (might come in handy, since you will be able to attach a USB storage device). I would rather see some of this money being spent making the Fonera 1.0 better, expanding the FON community, not wasting money on things like Twitxr, developing the Mexican Wave site, paying hot celebrities, and maybe developing firmware for a real router (something like a linksys router). I guess they have a reason to start FON Russia, I don't know, but I'm assuming there is some type of market over there. It doesn't help out the US though. As for the Fonera 802.11n, I don't think there will be a market for it yet or this year as a matter of the fact. Give it time though, just like technology has moved from 802.11b to 802.11g, wireless-n will eventually become the new standard. Anyway, read the techcrunch article and the comments (some of them are pretty interesting and Martin has responded too)

Links:

http://english.martinvarsavsky.net/investments/fon-raises-95-million-in-tough-markets.html

http://blog.fon.com/en/archive/business/fon-raises-95-million.html

http://www.techcrunch.com/2008/04/10/fon-raises-another-95-million-in-c-round/

and of course, the community opinion

http://boards.fon.com/viewtopic.php?p=28915