This article was published on April 12, 2008

FON Raises $9.5 Million: No More Free Hardware?

FON Raises $9.5 Million: No More Free Hardware?
Boris Veldhuijzen van Zanten
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Boris Veldhuijzen van Zanten

Founder & board member, TNW

Boris is a serial entrepreneur who founded not only TNW, but also V3 Redirect Services (sold), HubHop Wireless Internet Provider (sold), and Boris is a serial entrepreneur who founded not only TNW, but also V3 Redirect Services (sold), HubHop Wireless Internet Provider (sold), and Boris is very active on Twitter as @Boris and Instagram: @Boris.

Martin Varsavsky
Fon founder Martin Varsavsky with a Fon router.

Fon, the free hotspot provider that gives away free Wi-Fi routers and wants to build a worldwide, and free, Wi-Fi network has announced closing a new investment round. They raised $9.5 Million from a bunch of investors. The current shareholders (Google, British Telecom, Digital Garage and Martin Varsavsky) invested some but there is also a new investor involved: the US Venture Capital arm of Sistema, Russia´s leading telco. This also means that FON will start expanding into Russia.

Another exciting new plan is the development of a sort of personal proxy server built into a Fon Hotspot. It will up- and download content from the internet for you while you are doing other stuff. It will be called Fonera 2.0 and we can’t wait to get one for free.

And that might take longer than expected because Martin has announced that he is going to be a little more cautious with his money. No more free hardware and slightly higher fees will help Fon decrease their burn-rate from 1.2 million a month to $500.000 a month. There are also plans to upgrade to the updated WI-Fi protocol lovingly called ‘802.11n’.

There is no mention of Index Ventures and Sequoia Capital who invested in earlier rounds. These earlier rounds also brought in a lot more money so it is likely that Fon is less successful than they try to appear. It is very hard to find out how many active Foneros are currently active and estimations range from 125.000 to 1 million+. Fon is not very transparent when it comes to showing the number of routers which are really active. If you have set-up a Fon hotspot in the past you must enter a request to have it removed from their maps. If you don’t they still count you in their media and investor statistics, as a live Fon Hotspot. Of the Fon Hotspots that are actually live only a small percentage will be a an actual hotspot where people accidently stumble upon it.

As a former Wi-Fi Hotspot operator (sold my business in 2003) I’m not very optimistic about Fon’s future. The dream of having free and ubiquitous Wi-Fi everywhere is extremely alluring and it is clear and understandable that Fon has a large community of eager believers.

Fon makes for a great story but is that enough to build a business on.