Great use of VC funds

Published November 5th, 2006 edit replace rm!

For those of you who haven’t yet heard of FON, they are a very cool Spanish WIFI startup, who aim to make their Wifi network ubiquitous throughout the world. So how have they taken up the challenge of the worlds telecoms companies?

The 5 euro FON social router

Well they’ve created what they call a social router. This is basically a Wifi Access point with two completely separate SSID’s – one public and one private. The one above is mine. If you hurry up you can get one as well for 5 euro or US$5. This offer ends on the November 8th after which you will be able to get them for $29. Martin says the cost of each router is $28. They say that they have 20,000 routers connected.

I’m not sure how many they have actually sold, but assuming they have sold 20,000 routers that means the direct costs for the routers have been at least $460,000, not including development and marketing costs. I think this is a fantastic sales strategy and one that could only be done with VC funds.

This is similar to the $10 gift certificates that helped grow PayPal like crazy during their first year. This was also a very good use of venture money.

They also show that there are definitely uses for Venture Capital. I still believe though that until you reach the point where you have great plan like this, it would be best to stick to bootstrapping or angel funding.


Arkadiusz November 8th, 2006

20.000 times 28 is more likely to be 560.000 ;)

Just a small thing. Anyway thanks for writing about interesting stuff like this.
Keep up the good work

Arek November 23rd, 2006

Just FYI, if you have premium membership at XING (formerly OpenBC) you can get El Fonera for free (including taxes and posting).
You need to share the connection ofcourse, but it is a great offer.

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