VoIP Firm Vonage Makes Venture Capital List

Jersey Firms Make Venture Capital List

July 26, 2005

By Beth Fitzgerald

Two New Jersey companies -- the Internet telephone company Vonage and the pharmaceutical startup Esprit Pharma -- made the list of the top 10 U.S. companies funded by venture capitalists during the second quarter.

Edison-based Vonage raised $199.9 million while East Brunswick-based Esprit drew $63 million, and they illustrated the "barbell" shape of the VC market in the quarter, which was heavily weighted toward startup companies and mature firms.

"There was a lot of activity at both ends of the spectrum," said John Taylor of the National Venture Capital Association, which announced the VC figures yesterday with PricewaterhouseCoopers and Thomson Venture Economics.

Venture capitalists pumped $5.8 billion into 750 U.S. companies during the second quarter, up from $4.9 billion for the first quarter and just under the $6.1 billion companies raised during the 2004 fourth quarter. A VC makes high-risk investments in private companies, typically in high-tech and life sciences, in exchange for an ownership stake and the chance to make a big profit if the venture goes public or is acquired.

The Vonage deal paced the second-quarter surge in venture funding to New Jersey: $360 million was distributed to 22 companies, up from $145 million shared by 21 New Jersey companies in the first quarter.

"While the majority of the increase in funding is attributable to the nearly $200 million in funding to Vonage, the diversity in New Jersey investment -- across a wide range of industries and stages of command development -- speaks to the nature of our market and continued interest in a variety of companies with varying needs," said Susan Roos, New Jersey Venture Capital Leader at PricewaterhouseCoopers.

Esprit specializes in pharmaceuticals for the urology market, and the company "is at an early stage, but moving rather quickly," said Robert More, a partner in Princeton-based Domain Associates, one of the VCs backing Esprit.

Vonage was founded in 2001 and has established itself as the leading provider of Internet telephony and serves more than 800,000 customers in North America, according to spokeswoman Brooke Schulz. The company has raised a total of $408 million, and will use the latest round of financing to expand into Europe and Southeast Asia, she said.

New Jersey mirrored the national trend, with telecom and life sciences companies winning the majority of the financing. Other industries funded in the quarter in New Jersey were computers, electronics, instrumentation, information technology and semiconductors.