Another $250-million of private equity for Vonage? What happened to the much-anticipated IPO? According to the Wall St. Journal, Vonage is using a five-year convertible-debt issue to raise the money. Frankly, it seems like a strange turn of events for a company with IPO or sale aspirations. It makes one question whether there was any appetite for Vonage once potential investors got a look at its books and took a hard look at the competitive landscape. Vonage CEO Jeff Citron, who could sell ice to the Intuit Inuit, claims this new financing round "really  validates what we're doing", adding Vonage was originally looking to raise $155-million but took more in the wake of strong demand. Call me a skeptic, call me confused but I don't get the Vonage story any more - and I don't get how this round really validates Vonage more than the previous three rounds. I don't understand how Vonage can raise its total fund-raising to $655658-million and still expect to get a big-time return in an industry where competition is getting fierce and margins are understand pressure. Maybe Vonage believes there's another eBay willing to make a multi-billion dollar strategic gamble. A little back-of-the-envelope math suggests Vonage has annual revenue of $300-million to $420-million (1 million subscribers X $25 to $35 a month). So what's that worth? One times sales? Two times sales? Three times sales? If you take 8x8 Inc.'s valuation of $126-million based on 93,000 subscribers, you could argue Vonage is worth $1.3-billion - which strikes me as high. I think the $250-million financing - if it actually materializes - simply buys Vonage more time so it can improve the books to do an IPO or find a buyer. At this point, what's a few more million dollars for investors who had already chipped in $405-million?! Om Malik is also a standing member of the skeptics camp, dismissing a $2-billion valuation suggested by some analysts. Andy Abramson is also a charter member.

Update: The investors in the latest round include Bain Capital, New Enterprise Associates and Meritech Capital Partners.