Fonality Scores $12M for Open Source PBX

When the times get tough the tough choose cheaper, open-source phone systems. Such seems to be the theme of Fonality CFO Dan Rosenthal’s chat with me about the company’s latest $12 million venture funding led by Draper Fisher Jurvetson Growth Fund with participation from existing investor Intel Capital. And you know, I don’t think he’s wrong. The company is “sometimes profitable,” according to Rosenthal, and has grown rapidly in the last few quarters. Supporting that growth is one of the reasons for the third round of funding.

The Ciscos and Avayas of the world won’t keel over because Fonality’s selling more phone systems and software (while hoping to beef up its retail distribution network at stores such as Best Buy and through Dell), but Fonality has a really good chance to play big, because its open source roots mean its phone systems for smaller offices costs tens of thousands less than similar system over a multi-year time period. For a 70-person office its PBX costs about $23,100 up front compared to more than $30,600 in annual leasing fees for a comparable system from Cisco.

The economic downturn might actually help Fonality find more customers, especially since most entrepreneurs (who would be in the market for cheaper phone systems) tell me recessions are the best time to start a business.