Fon Raises $9.5 Million For Russia Launch, Making Big Losses

WiFi-sharing community Fon has raised a $9.5 million third round of funding to take the service to Russia and upgrade its product offering. Spain-based Fon, launched in February 2006, lets some 170,000 worldwide participants share each others WiFi connections. BT (NYSE: BT) took an undisclosed stake in the company last autumn to add the service to its broadband offering – it’s joined in this round by Google, Digital Garage and founder Martin Varsavsky. The round was led by Russian VC house Sistema. Previous backers include Skype, Google (NSDQ: GOOG), Index, Sequoia and Excite.

Varsavsky wrote Fon would launch in Russia, launch its version 2.0 and develop an 802.11n router for the end of the year. That’s all very well but mobile network speeds are increasing faster than WiFi coverage; 801.11n may offer greater coverage than 802.11b, but only WiMax is going to offer city-wide access than can match telcos’ ubiquity – and that’s well-pricey.

What’s more, Fon is running big losses. Though it has shrunk monthly losses from $1.3 million to $800,000 last year, Varsavsky still forecasts losses of $500,000 per month until a late-2009 break-even. Being open, he blamed “tough market forces”.