Video Conferencing Startups Raise Big Dollars In Race To Beat Big Tech

Illustration of woman on video screen.

Most tech companies, even if they are primarily office-based, rely on video conferencing solutions to coordinate with offsite team members, work with vendors, or conduct off-campus interviews.

Despite this dependency, no one startup or even major tech company has been able to successfully own video conferencing like, say, Slack owns internal corporate communications. And even more, across nearly every video conferencing solution, connectivity issues are common, video quality is often lackluster, and issues with mics (“can you hear me now?”) abound.

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On the bright side for entrepreneurs, these persistent problems give video conferencing startups plenty of room to compete. And investors appear more than willing to continue improving quality and bolstering competition with funding.

Can You Fund Me Now

Since 2010, video conferencing startups (which you can find here) have raised a touch over $1.1 billion across 79 known deals.1

Overall, known investment totals have trended upwards in the sector. However, known deals have persistently fallen below highs set in 2013, as can be seen in the chart:

The dichotomy between overall decreasing deal counts and increasing dollar amounts likely amounts to VCs forgoing investment in early-stage startups, preferring to pour large sums of money in known quantities.

To prove the point, 2017 funding totals came in at exactly $250 million, making up nearly a quarter of total known funding into video conferencing startups. And while 9 known deals were announced in 2017, only two startups accounted for the vast majority of funding.

At the start of 2017, Zoom, a video conferencing solution aimed at the enterprise, raised a $100 million Series D. It represents the majority of the $145 million the San Jose-based startup has raised so far, according to Crunchbase.

But while that Zoom round is a pretty significant contribution to 2017’s record year in terms of funding, Fuze, another enterprise video conferencing solution, managed to snag $134 million in funding throughout 2017. Overall, the Boston-based startup has attracted nearly a half-billion in total funding from investors including Bessemer Venture Partners, G20 Ventures, and Summit Partners.

Fuze is also a major contributor to funding in 2018 as well. According to Crunchbase, Fuze raised a $150 million Series F at a pre-money valuation of $400 million on May 10th. The round accounts for 82 percent of known funding in 2018 to date. 2018, as a whole, has garnered a little over $182 million across four rounds. It is likely another large round (possibly from Zoom, which has not raised in 2018) will be needed to beat 2017 totals. Based on current trends, it’s doubtful smaller deals in this particular category will close the gap.

However, that doesn’t mean new bets are being completely dismissed by investors. A few startups, with considerably less funding, are trying to make a play in the sector.

Norway-based Huddly, for instance, is building a new breed of webcam, called the Huddly Go, that is specifically built to improve video quality using artificial intelligence. So far, Huddly has attracted $25 million in funding. Owl Labs also competes in the space via hardware. The startup has pulled in $7.3 million in funding to create a webcam that can stream a room in 360 degrees, claiming that it makes video conferencing more natural.

Some startups are looking to make video conferencing much more useful with additional features, such as building project management tools directly into video conferencing solutions. Acrossio, which has raised $800,000 in funding, allows video conference members to search transcribed text, create recordings, and set action items that can be synced to Asana.

Overall, the space is dominated by a handful of startups in terms of dollar amounts. And although Zoom and Fuze have attracted a healthy chunk of the funding, there is also plenty of time for much larger tech companies, such as Microsoft, Google, or Apple, to throw even more weight behind their video conferencing solutions.

For the sake of video quality and performance, let’s hope the competition, bolstered by VCs, stays fierce.

  1. Startups in this analysis are defined as video solutions targeted to small businesses and enterprise. Hardware startups that are specifically tailored to improving the video conferencing experience were also included.

Illustration: Li-Anne Dias

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