Asterisk Creator Gets Venture Backing

Digium, the company that spawned open source PBX and telephony software, Asterisk, has received $13.8 million in Series A funding from Boston-based telecom specialist venture fund, Matrix Partners.

Digium is the latest amongst a growing list of VoIP-related venture investments, and perhaps the most prestigious. David Skok, a general partner at Matrix Partners who won his VC stripes by backing JBoss, an early Open Source software company joins the board of the company. Digium is one of the early pioneers of the open source telecom movement.

This also marks the latest chapter in the amazing story of Digium founder Mark Spencer and by extension, the Asterisk PBX software. In 1999, Spencer started the Huntsville, Alabama-based operation with his savings and a few thousand dollars in investment from his parents.

Since then, the simple little PBX he wrote has become a rebel yell for telecom hackers, and Spencer a rock-star at VoIP conferences such as VoN. While it is not the only open source PBX, it certainly is one of the most popular.

The company turned profitable in 2002, and remains so. Digium has experienced break neck growth over past few years. Today Asterisk boasts over one million users. Nearly, 1000 copies of the software are downloaded every day. The profitable status of the company, however made me wonder why does Digium need VC dollars?

Spencer explains that the company will use these funds to expand its operations by selling a variety of Asterisk-based IP-PBX systems to small business and large corporations. In doing so, the company might end up competing with others who base their products on Asterisk. Fonality, a Los Angeles-based company, for instance sells Asterisk-based PBX systems to the very same small and medium sized businesses.

“To me, Digium has the same, perhaps even better characteristic than that of JBoss,” says Skok, “It has a highly seasoned product, market leadership, and is profitable.” And it is also one of the hottest VoIP plays around.

Skok may have scored a coup, even if it might have cost Matrix some serious dollars in terms of valuation. Digium, he says has everything to make it one of Matrix’s most successful open source companies. With many old-styled PBX phone systems being replaced by new VoIP-based systems, a low cost offering based on Asterisk can be very attractive for buyers. Fonality, for instance, has quickly garnered 10,000 users for its ultra low-cost Asterisk-based devices.

Though he only has known Spencer for a few months, Skok says his big epiphany came when he downloaded and installed Asterisk on his computer, went overseas, and plugged into his broadband connection. He was soon making calls all over the US, as if he never left his Boston office. The Asterisk became his extension, and he was hooked. “Digium is definitely in a position to become the next big open source company, behind Red Hat, JBoss and MySQL,” says Skok, clearly smitten by his latest investment.

Also, A Short Q&A with Digium founder Mark Spencer.