Skype Snags $18.8 Million In Funding

Peer-to-peer IP telephony startup Skype Technologies S. A. has secured $18.8 million in venture capital funding, the company announced Monday.

The lead investor was Draper Fisher Jurvetson with Index Ventures as an announced co-investor. A previous investment was made by Bessemer Venture Partners, Mangrove Capital Partners and a Tim Draper investment vehicle, Draper Investment Co.

Skype didn't immediately elaborate on what it plans to do with the investment. However, one industry analyst suggested that Shype may use the infusion to improve its free VoIP offering and provide premium fee-based features while it could also license its technology to emerging VoIP providers.

"Right now, Skype is definitely a residential-type service," said Kevin Mitchell of Infonetics Research. "It's not ready for business. The interface is definitely a Beta -- it's still in development."

Mitchell is directing analyst of Next Gen Voice at Infonetics. He uses Skype with his laptop utilizing the laptop's microphone, and said Skype's voice quality is superb, particularly for "voice chat.""Skype still has just a very small piece of the phone network," said Mitchell. "The real question will be how it interconnects with others." The company has continued to add features. Late last month, for instance, it began offering free conference calls with up to five callers connected at any one time. Skype was at the CeBIT trade show in Germany this week where reports surfaced that mobile phone numbers will be available for the Web phoning service.

Because traditional telephone service providers are entering the VoIP market in rising numbers, Mitchell said Skype might also find a good business by licensing its features.

"The priority of the company is to enhance the value of its network," said Kelly Larabee, Skype spokeswoman. "We're committed to making it simple and easy to use. International calling will remain our core and free (service.)"

As of Tuesday, nearly nine million Internet users had downloaded Skype software and, 3.6 million of those have registered. Larabee said that as she spoke some 282,204 Skype users were online at that moment. She said a new user registered every four seconds.

Users on both ends of a Skype transmission -- usually on broadband connection -- must have Skype software and a listening device like a laptop microphone or headphones. Larabee said a user can be up-and-running on Skype in less than five minutes -- typically one minute to download the software and two minutes for installation."While Skype will remain committed to a simple to use yet feature rich free offering, we will introduce an array of premium services at our first commercial launch later this year," Skype's founder and CEO Niklas Zennstrom said in a statement.