2009 16
A profitable Fon is more Fun
Published by MartinVarsavsky.net in Fon with No Comments
- Image via CrunchBase
At Fon we have an amazing board: Anil Hansjee of Google, Danny Rimer and Mike Volpi of Index Ventures, Janus Friis and Niklas Zennstrom of Atomico (formerly of Skype) and Chris Smith of Coral Ventures. We also have investors from Sequoia Capital, Ebay, BT, Digital Garage, Excite Japan, Marc Andreessen, Joanna Rees, and of course myself, CEO and Founder. All of us together have invested 36 million euros in Fon. All of us a little crazy of course, because the basic idea of Fon, “share a little WiFi at home and roam the world for free” is a far fetched, improbable concept. And it has not been a smooth ride. We have made significant mistakes, among them losing two thirds of our funds subsidizing foneras many of which ended in some lost closet around the globe. It was a year ago in the midst of the crisis and, recognizing these mistakes, that I started to personally finance the losses of the company. I felt it was my turn to show that I was willing to risk it for Fon. But losing around a million dollars a month it really seemed that Fon was going to sink. But this post is the story of how it did not. Most likely because I had been through this before.
I saw Viatel sinking for 9 years until my original 200K, and those of my then key investors like George Soros, ended up being worth over a billion. I saw Jazztel lose large amounts of money as well, but because of the strategic value of its network it was then worth 900 million when I left and my investors Advent, Apax, Spectrum Equity cashed out nicely. I also saw Ya.com, a company that we built with 55 million euros and sold for 750 million dollars, lose tons of money. And we sold it way before it was profitable again because of its strategic value. Both Deutsche Telekom and France Telecom wanted to own the second largest portal/ISP after Terra. And I saw defeat as well. I personally lost 52 million dollars in Einsteinet, a German cloud computing company managed by a remarkable group of people in Munich, but 5 years ahead of the boom of cloud computing. It was a terrible blow for me and my investors, but, if anything, it taught me a simple lesson, not to give up too soon. Cloud computing did make it in the end and Google, my investor in Fon, would have probably bought Einsteinet. This background may explain why last year I decided to insist with Fon.
19 years in technology have trained me to expect the unexpected, to “hang in there”. What the 3 companies that I started and got to be worth over $700 million dollars by the time I sold have in common, is that they were strategic assets that huge telcos wanted to buy. But I still could not make them profitable. I guess it did not matter. In the right markets you can get away with this. But what was true in 2000 was not true in 2003, when I threw in the towel on Einsteinet. Presently the world is like 2003, except that what happened to technology then is happening to everything else now. So last year when I became the only investor covering the losses of Fon I knew that for us it was profits or death. I went for profits.
And a year later I am happy to announce, a la Facebook, that the last quarter of 09 will be our first profitable quarter. And I mean not just EBITDA positive but profitable. I can also share with you that we will probably do around 2.5 million dollars in revenues up from 400k in the first quarter (all figures are in dollars). Currently growth is phenomenal, costs are low and margins are high in our two lines of business; selling foneras, selling wifi access passes alone or with our partners which include some of the largest telcos in the world (BT, SFR, Comstar, Zon and others).
Of course I don’t know precisely where do we go from here at Fon. But since we are not a public company I can share with you at least where I would like to see Fon in 2010. By next summer I would love to be doing around 1 million in profits per month. And for all of 2011 I would be very happy if we did around 20 million in profit. This is not unreasonable but we have to get from here to there. Growth is tremendous but we could stall. To reach these objectives we have to continue making telco deals and make the launch of our Fonera 2.0n a success. I am personally very excited by how well the Fon team has worked to come up with the Fonera 2.0n, a router that not only shares a little wifi at home and roams the world for free, but it is also your “internet assistant”. The Fonera 2.0n is really a PC hidden inside a WiFi router. When you connect it to a hard drive of your choice it downloads torrents, Megaupload, Rapidshare, uploads to Youtube, Picasa, Facebook, Flickr. It also converts 3G to WiFi like the MiFi. It tweets itself so you can follow it away from home and it has a few other tricks such as making money for its owner. We think that for 79 euros or 99 dollars it will be a hit. Or at least we hope so because whatever people in business say, they never really know how successful or not something will be.
Granted, we could lose momentum and be not at 1 million but at something like 300K a month in profits by next summer, in which case recovering the 36 million euros invested will mostly depend on what got me and my partners off the hook in the past, a strategic sale to large players. Telcos who want to own the biggest and fastest growing wifi network in the world. Another source of value may be the partnership with Ubiquisys, the FemtoFonera, which expands the Fonera model to the 3G world. This is unproven value but it could very well materialize. In urban areas it is ugly and absurd to continue to build huge antennas in roof tops when small elegant cells like the ones Ubiquisys makes can give both 3G and WiFi to people in the block. This is especially useful in underground areas, garages, malls, where 3G coverage is very costly and inefficient.
As a start up with 3 years of life, breaking even makes you, first of all, a sustainable company and that we will be… very profitable? That remains to be seen. But turning the corner is huge for us. I would like to end this post thanking all the foneros we have around the world, our partners the telcos who realized how happy customers who pay at home and roam the world for free can be with their service, to our investors who trusted us with a nutty idea and to all of those who have worked and now work for Fon. I would like to thank my now wife Nina, who I met working at Fon, who still works with me at Fon, and who put up with me during the worst moments of this venture.
Muchas gracias a todos!
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No Comments
felipe on September 17, 2009 ·
A working fon would be wild fun fon:
http://www.beta.bt.com/bta/forums/thread.jspa?messageID=64238
Martin Varsavsky on September 17, 2009 ·
Oh! Horror!! Something that doesn´t work! Felipe the day you build your own company you will realize that it is nothing but a pile of things that don´t work well. Cellular networks with phone calls that get cut off, computers that crash, cars that don´t work. Fon is a constant improving, fixing, repairing. And the guys who work at Fon work their ass off, they are amazing, but they are human. And their work should be appreciated. So after reading your comments which are son hurtful to people who do their best trying to contribute to their start up I decided that you are not allowed to comment on this blog anymore. Fuera chico. Vete.
GRAN vendedor on September 17, 2009 ·
Eres un monstruo Martin. Has conseguido convencer a empresones que compren burras cojas y ciegas. Y tienes las narices de decirlo aquí bien clarito. Olé.
Nunca entendí que Fon pueda tener futuro estando ahí el 3G que usamos todos los que viajamos tenemos eso. Si tú dices que ganáis dinero habrá que creérselo, pero date prisa en vender Fon, porque está a la vuelta de la esquina WIFI gratis en las ciudades importantes, ya o sabes.
La mejor de las suertes con el próximo pardillo, qué mérito tienes, el dinero te lo mereces.
Martin Varsavsky on September 17, 2009 ·
que pasa esta noche, dan un premio al envidioso que se duerme mas tarde?
Martin Varsavsky on September 18, 2009 ·
Venga ya, ahora resulta que si nos va bien no es por el equipo increible que tenemos en Fon ni por la buena idea que es Fon sino porque las empresas más importantes del mundo están pobladas de pardillos.
Javi Saiz on September 17, 2009 ·
Thanks Martin your experience is really inspirational for me,.
Congrats for reaching the breaking point with such an “out of the box” thinking and business model
Javi Saiz on September 17, 2009 ·
para gran vendedor.
comprar un pez = comprar beneficios,
comprar una caña = comprar estrategia.
Martin es bueno fabricando cañas, hay otros que son mejores pescando.
hoy está celbrando que ha fabricado una caña y esta consiguiendo pescar, La envidia es muy mala
javi saiz on September 17, 2009 ·
Mafrtin, sorry I didn’t mean to offend you but the oppostiy.
Your thinking out of the box is really inspirational for me Thanks and congrats
Martin Varsavsky on September 18, 2009 ·
No Javi it was not about you. Sorry!
Daniel on September 17, 2009 ·
Muchas felicidades de corazon desde Los Angeles – warm warm congrats from Los Angeles
Martin Varsavsky on September 18, 2009 ·
Gracias Daniel!
Bastian Manintveld on September 17, 2009 ·
Well done Martin! I like the way you’re open and honest about both your successes and your failures.
Muy bien!
Bastian
baptiste on September 17, 2009 ·
Bravo monsieur ! Muchas felicidades de francia
Warning on September 17, 2009 ·
This blog does not accept criticism. If your goal is not to flatter its owner, please leave it immediately writing any comment.
Martin Varsavsky on September 18, 2009 ·
This blog accepts criticism. But the author of this blog does run out of patience somtimes, that is true.
steven on September 17, 2009 ·
Great!!!! I hope you can catch some (isp) telco’s in the Benelux soon…
I’m really looking forward to the E-plus deal…that’s only 1 step direction KPN Netherlands & KPN Belgium 🙂
Joaco on September 17, 2009 ·
Enhorabuena!! La idea fue estupenda y en algunas zonas ha funcionado. Espero que con la venta que estás planeando ahora comience una verdadera implementación. Claramente la idea de este negocio era venderlo posteriormente a uno de los grandes..
Es interesante ver que publicas el breakeven para el próximo Q sin saber todavía las ventas de tu principal producto
Mucha suerte desde Bélgica, un país increiblemente atrasado en conectividad!!
Congrats on September 17, 2009 ·
I remember when the plan was to sell the company for 2 billion euros. But if just getting over break even after 36 million euros four years later is a success, then congratulations.
Martin Varsavsky on September 18, 2009 ·
2bn? Not a bad plan!
andres on September 17, 2009 ·
Fon with WiMax will be the biggest telco in the world, paid and enjoyed by us and owned by Martin.
I’m looking forward to that moment.
BTW I have a subsidized fonera 1, pata negra, and is switched on and working since I got it.
Thanks:
Andres
Carlos on September 18, 2009 ·
“Here’s to the crazy ones. The misfits. The rebels. The trouble-makers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules, and they have no respect for status-quo. You can quote them, disagree with them, glorify, or vilify them. But the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they cn change the world, are the ones who do.”
felipe on September 18, 2009 ·
Carlos,
I presume that you are talking about those that Martin bans from his blog. I also raise my cup for them. Cheers.
alexis bonte on September 18, 2009 ·
Congratulations Martin, I think its hard for people who have never tried to create a company to realize the amount of perseverance and sacrifice it takes to take a company from nothing to break even. I wish you, the fon team and its investors continued success.
oh and by the way I’m getting nice little emails from time to time about some “bills” buying some access from me…. 🙂
Carlos on September 18, 2009 ·
Felipe:
I am talking in general. About the bans, I respect the opinion of everyone but I also think Martin can do whatever he wants with his blog…
I also think fon is a great (and crazy) idea and – consider that making it happen is a great achievement.
So i guess that if you are on for a wild ride, you will find some sharp ends in the way…
yannmau on September 19, 2009 ·
Hi Martin,
Many congrats from an early adopter and still a big supporter of the concept, 4 years later.
I know how difficult building such a company and making it profitable can be.
I’ll make no comment about the comments.
BR,
YM
alan levy on September 19, 2009 ·
As your friend, former accountant and former colleague for more than 20 years, I am proud of your accomplishments. I have seen you during the Viatel days in some rough spots, and you always seemed to find a solution. We worked together at Viatel and I remember after getting back to NYC after successfully raising $75 million with Morgan Stanley we looked at each other and said, “we will be either incredibly successful or a total bust….nothing in the middle”
As an entrepeneur myself now running BlogTalkRadio (www.blogtalkradio.com) , the worlds largest on-line talk radio network, your vision also gave me an opportunity to leave the accounting field in 1993. I have achieved more success that i would have ever had imagined and like seeing value in a business or idea that is not quite ready to flourish, you saw something in me, 16 years ago. I will always be grateful.
Alan
Charbax on September 21, 2009 ·
You own the company, deal with all the investments and manage all your very talented and dedicated programmers. Yet please consider that some of us regular non-millionaire fans and WiFi-sharers may also have the visions and ideas which could make it work for you to make this not only a profitable business but a real revolution for the world.
1. You need to make WiFi roaming seamless. Please pick up the phone and call Free, Neuf in France, please tell them to sit around a table and agree on prices for WiFi roaming:
– WiFi roaming must mean one username/password must log users onto any WiFi network across Free, Neuf, FON, BT and any of the others. This means, users of Archos, ipod touch, laptops and other applicances can automatically log-on (it remembers username/password) to any WiFi hotspot.
– Prices could be set at 0.01€/minute, 3€/day, 12€/week
– Payment must be automatic based on credit of the user on their existing accounts. Not ever have to take out the credit card before logging on ever again.
2. You must allow connection owners to throttle the bandwidth usage and bitrates very precisely.
– Users should set it so when they are home, they get absolute priority on their own bandwidth. Only use the “unused” bandwidth for WiFi sharing services. Basically, I have 20mbit/s download and 2mbit/s upload. I don’t care if my nabours use 100% of my bandwidth as long as I am not using it myself. But as soon as I am home, as soon as my Fonera 2.0n might remotely start downloading/uploading something, then I want to automatically get the full bandwidth for myself as I would normally do if I wasn’t sharing the hotspot. If you have this working 100% reliably, then nobody will mind sharing their home bandwidth.
– You must allow ISPs to throttle bandwidth as well. The pricing for WiFi access can also depend on the quality of the bandwidth. 0.01€/minute, 3€/day, 12€/week may be for 2mbit/s, while a 100mbit/s access can be sold for double the price. If you manage pricing/bandwidth correctly, then you will give a perfect situation for Fiber-to-the-home, VDSL and higher speed ADSL/Cable to market their connections for such sharing. Since ISPs should get a significant cut of the profits when they make a big effort in expanding the network.
3. Please how us what you have got for 700mhz White Spaces. If you can announce and show something that would be like a Fonera 3.0 that also broadcasts on the 700mhz spectrum, then you will have something that appeals to your vision of a user created worldwide wireless broadband network, eventually free or very affordable wireless broadband for all. I know you like making deals with Telecoms all the time, but think about us the people, we want real freedom with our wireless spectrum, so please just show mockups or working prototypes of what the real ubiquitous free wireless broadband looks like.
Charbax on September 21, 2009 ·
4. Make your green-colored Fonera 2.0n not only a “personal internet assistant” but also a green revolution for the NAS/router/personal bakup/storage market. http://boards.fon.com/viewtopic.php?f=33&t=4842
– I want to be able to connect an unlimited amount of USB hard drives to the Fonera 2.0n and have them all be turned off 99% of the time, since I only need to access them less than 1% of the time. Thus Fonera 2.0n should completely cut the whole power to USB hard drives when they are not in use. Yet host the complete hard drive index in a small internal or quick to power and access lower power USB Flash memory.
– The idea is Terrabyte hard drives now cost $70, consumers should have a backup of their files at home just as well as on the cloud. And their home backup should be synchronized with the backups on the cloud. But if running the USB hard drive costs $10 per month in electricity, that could be considered a real waste, especially if the hard drive is only being accessed less than 1% of the time.
esdama on September 21, 2009 ·
Could I know my client number? I have my fonera since long time ago!
Luis FON on September 22, 2009 ·
@esdama if you are referring to your FON member number it is shown on the upper left side of the screen right after you log in at fon.com (with your FON account details). However your FON id is the email address associated to your account. If you are referring to any other number or would like anymore information, please contact us at support (https://www.fon.com/en/support/contactUs) we will be happy to assist you.
Andrea Vascellari on September 24, 2009 ·
Keep on rocking Martin!
Andrea
Gilles BianRosa on September 24, 2009 ·
Martin,
Great post, and congrats on the milestone!
BTW, expect a similar from Vuze in the next few months 😉
Gilles.
Guillermo Ruvalcaba on September 26, 2009 ·
Check this…http://gizmodo.com/5367257/now-available
Geoff on September 27, 2009 ·
FON is a brilliant idea but personally as a BT customer and world traveller. I have found FON bitterly disappointing 🙁 I’m pretty sure I have been unable to login to a FON network.anywhere yet, including Spain and Latin America..
btw Congratulations on your marriage to Nina. The photo I took of Nina is my third most popular picture on Flickr http://www.flickr.com/photos/geoffjones/535168568/
KEN on September 28, 2009 ·
WHAT IS FON ?
THIS IS UNBELIEVABLE THAT ALL THE STAFF IN FON’S COMPANY HAD NO INTEREST TO CONTACT CUSTOMER !!! SINCE MY QUESTION WAS RAISED ON AUG 19 !!!
STILL NO RESPONSE !!! MAYBE THAT IS THE BEHAVIOR OF YOUR COMPANY !!!
WHAT IS YOUR SERVICE ?
HOW TO GAIN CUSTOMER SATISFACTION ? UNBELIEVABLE POOR CUSTOMER SERVICE NOW !!!
Luis FON on September 28, 2009 ·
@Ken I’m sorry to read your question has not been answered yet. I would like to apologize for the lack of response and please be sure you will receive one. To follow this up and trace down what happened to your query please email me your incidence number (the one sent by our CRM system to confirm the reception) to luis.hdez(at)fon.com. We are sorry for this and hope not to lose your custom.
Nathar Leichoz on October 2, 2009 ·
I’ve always admired Mr. Varsavsky for his visionary qualities and first met him in 2007 through the FON project through the web interface team. I’ve always thought it was a bold move, but I truly appreciated the growth and potential of such product. Today after months and years of grassroots pushing, meetings with boards, stick diagrams, etc., we have finally brought the reality of FON to the market. And it’s doesn’t stop there. FON is yet to reach it’s true potential as a media and communications hub that is plugged right into the network of every home and office. And we are all laboriously striving for that day when FON becomes the centerpiece of the digital revolution. Kudos and cheers to the whole FON team!
Martin Varsavsky on October 2, 2009 ·
We all thank you Nathar!
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nonosir on September 16, 2009 ·
“the biggest and fastest growing wifi network in the world´”.- what a big nonsense. the very only source of growth is BT. – You did not manage repairing stalling ZON. In France only http://:80 is available – not even mailing using thunderbird is possible. you closed the french team. – oh man, you are really brutal dreamer, having lost the realistic point of view . – big exit to BT , thats what i guess.
Martin Varsavsky on September 17, 2009 ·
big exit to BT is my punishment? I can think of worse things in life 🙂