What Jeffrey Citron heard in a cheaper phone call

The telephone worked. Jeffrey Citron had taken an IP phone home, plugged it into his broadband connection and called the people back at the office. The action was almost aggressively ordinary. That was its attraction. A familiar conversation had found another way through, and the telephone company suddenly looked less indispensable.

Citron would help build Vonage around that possibility. He had already spent years in a business where a change in the route could change the economics: stock trading. An order and a phone call are different things, but both need to reach someone. Both had established companies charging for the journey.

His career would also demonstrate how much trouble can travel along a new route. There would be an SEC settlement, a difficult public offering and a return to the chief executive’s chair during a corporate crisis. The cheaper call makes a useful starting point. It leaves plenty to explain.

A desk before a dial tone

Citron grew up on Staten Island and graduated from Port Richmond High School in 1988. He took advanced mathematics and used a Commodore 64. A clerk’s job at Datek Securities followed. There he met programmer Joshua Levine. Their working lives converged around the machinery of trading: how an order entered the market, what happened next and how software could change the process.

His interest in markets had a modest classroom beginning. A high-school economics assignment asked students to select securities; one of his choices was MCI. The appeal was the daily verdict. A decision made yesterday acquired a price today. For someone drawn to immediate feedback, a market offered a remarkably punctual critic.

Island ECN, founded in 1995, addressed order execution through a computerized trading system. Buyers and sellers could enter orders into an electronic network and have matching orders executed. Citron helped build a business around making that transaction work differently.

In February 1998 he became chairman and chief executive of Datek Online Holdings. The company grew into the fourth-largest online brokerage in the United States. He departed Datek and Island in October 1999. Both businesses subsequently changed hands in 2002: Island went to Instinet in a $503 million transaction, and Ameritrade acquired Datek for $1.3 billion. Those were company transaction values, rather than a statement of Citron’s personal proceeds.

The $22.5 million interruption

The trading years also produced a serious regulatory reckoning. In January 2003, the Securities and Exchange Commission charged Citron and others with securities fraud and related violations involving Nasdaq’s Small Order Execution System, known as SOES.

The SEC alleged that the defendants improperly used a system intended for small customer orders to conduct proprietary trading. It also alleged that nominee accounts, fictitious records and false reports concealed the conduct. Citron settled without admitting or denying the allegations. He paid approximately $22.5 million in civil penalties and accepted a permanent bar from association with any securities broker or dealer.

These were civil proceedings. The settlement’s terms matter, as does the distinction between an allegation and an admission. So does the size of the consequence. A career that helped change trading cannot be understood solely through acquisition prices; its regulatory record belongs beside them.

By then, Citron had moved into telephony. The new business offered a different market and a different set of incumbents. It would eventually bring him back to public investors, this time as the founder of a company selling phone service.

A phone comes home

Vonage grew out of Min-X, a venture associated with internet-telephony entrepreneur Jeff Pulver. Citron helped finance the change toward a consumer phone service and became chairman and CEO in January 2001. Carlos Bhola was another early participant. This was a company assembled through people with different kinds of knowledge, rather than a telephone appearing fully formed on one founder’s kitchen table.

The home-phone experiment made the technology tangible. Explaining it to a customer was another assignment. Citron recalled that the initials VoIP confused people. Calling Vonage a broadband phone company gave them something they could recognize. The team spent nearly a year working through marketing, pricing and distribution before moving ahead with selling.

He had a particular taste in business models: services that could grow through software and marketing without requiring a factory. Vonage used the broadband connections customers already had. A standard telephone connected to a Vonage-enabled device, while the company carried voice as digital packets. The household kept the familiar act of picking up a receiver.

Branding mattered to Citron because an established name could be recognized without being wanted. In 2005 he put it sharply: “Just because I know who you are doesn’t mean I want to buy something from you.” It was a useful line for an upstart competing with companies whose names already appeared on millions of bills.

When growth sends the bill

Vonage’s growth was rapid. The company reported revenue of $18.7 million in 2003, $79.7 million in 2004 and $269.2 million in 2005. By April 1, 2006, it had more than 1.6 million subscriber lines. These figures describe a service that had moved far beyond an interesting office demonstration.

Advertising helped bring in those customers. Marketing expenditure during 2005 and the first three months of 2006 totaled $331.7 million. The company’s accumulated deficit at the end of that period was $467.4 million. A network built around software could still require an expensive introduction.

In February 2006, Michael Snyder replaced Citron as CEO; Citron became chief strategist and remained chairman. The initial public offering arrived that May at $17 a share. The stock promptly fell. Customers had also been offered access to IPO shares, making the troubled debut an especially uncomfortable encounter between a consumer brand and its own subscribers.

Patent litigation added pressure. In April 2007, Citron returned as interim CEO after Snyder’s departure. The return put the founder back into the daily work of running the business during a difficult period. He held that interim position until July 2008.

“Being an entrepreneur is like being a parent.”

Jeffrey Citron, 2005

The analogy came from Citron himself, who described the need to surrender some authority as a company matured. Vonage’s history gave the comparison an awkward sequel: sometimes the parent gets called back. By 2009, the company had reported its first quarterly profit since its founding. The path from working product to profitable enterprise had taken considerably longer than placing a call.

Whose internet carries the call?

For Vonage, access to broadband was a business dependency. Citron took that concern to Congress, arguing for an internet on which network owners could not decide which competing services would flourish. His testimony used a domestic comparison: imagine an electricity supplier determining which appliances could be plugged into a wall.

The argument fitted the company he was building. Vonage needed another company’s connection to reach its customer. If the owner of that connection could disadvantage an independent calling service, the attractive economics of the product faced a new obstacle. A debate about network rules could become a debate about whether the phone worked as promised.

Vonage later expanded into business communications, including communications APIs, unified communications and contact-center services. Ericsson completed its acquisition on July 21, 2022. The company Citron helped establish had become part of a telecommunications equipment group. A venture begun by offering households another route for calls had travelled into a wider corporate communications market.

The Labrador on the letterhead

Another institution had been growing alongside the companies. Jeffrey and his wife, Suzanne, established the Charles Lafitte Foundation in 1999. Charles Lafitte was their black Labrador retriever. A dog’s name is a pleasantly unceremonious choice for a philanthropic letterhead, especially from a family familiar with financial and telecommunications terminology.

At its 2015 Charity Golf Classic, the foundation raised $1 million for Count Basie Theatre in Red Bank, New Jersey. The money would create an endowment for arts education and outreach. Jeffrey and Suzanne matched donations dollar for dollar. Their daughter Kyra, active in the foundation’s Kid’s Corner, also addressed attendees.

The arts funding had practical destinations: instruction, outreach and opportunities for students whose access might otherwise depend on where they lived or what their families could afford. An endowment extends the timetable. The event happens on one afternoon; its proceeds are intended to keep doing work after the guests leave.

The family foundation gave Duke University $5 million in 2018 and another $5 million in 2021. The later gift included support for bringing experienced industry leaders into engineering education. Citron argued that rapidly changing technical fields required students to have direct contact with people working in them. The classroom exercise that once drew him toward markets had a distant counterpart here: learning through contact with the world outside the classroom.

In September 2022, the foundation announced a $1 million gift to First Tee, supporting youth development nationally and on Florida’s Treasure Coast. Citron connected the decision to his experience of golf and the habits it could teach young people. His account emphasized confidence, perseverance and integrity.

He also fishes. Fishing has been an interest since childhood. After he and Suzanne moved to Florida in 2015, he devoted time to the sport, travelling around the Caribbean, Central America and the eastern United States. The public life includes large transactions and formal titles; it also includes time spent waiting for something to bite.

The line from the clerk’s desk to the broadband phone to a family foundation is uneven. It contains invention, capital, penalties, persistence and other people’s work. Citron’s first successful call home offered an immediate answer: the connection functioned. The rest of his career has required slower judgments about what those connections cost, who could use them and what they made possible.