Fon raises $13.5 million in funding round led by Atomico to put the US in its sights

Fon has secured €10 million ($13.5 million) in a new funding round led by Atomico, the VC firm founded by Niklas Zennström, co-founder of Skype. The company markets wifi routers which turn domestic connections into a network of publicly accessible hotspots.

Coral Group and other existing Fon investors also contributed to the round which is designed to meet the surge in demand for WiFi from smartphone and tablet users, and to expand in the US and other markets. Previous rounds for the company, which was founded in 2006 by serial entrepreneur Martin Varsavsky (who also founded Jazztel and Viatel), raised over €40m.

In Japan Fon has an agreement with SoftBank, the Japanese mobile operator, where Fon’s WiFi routers work with the iPhone to allow more access to broadband but crucially to reduce the load on its mobile network. It’s this model which is expected to be rolled out in other markets.Varsavsky said the company “could have done an outside round” but decided to keep it’s high profile investors on board.

Fon’s ‘Fonera’ routers let users connect to WiFi at Fon hotspots for free in exchange for sharing their Fon-powered WiFi at home. The company’s 802.11n WiFi routers broadcast two dedicated WiFi signals, one encrypted and private for the home user and one publicly accessible via password to registered members of the Fon community. It now has 3.35 million hotspots, a growth of 200% year-on-year, making it the biggest WiFi network in the world. Fon sold about 1.6 million routers in 2010 contributing, generating revenues of €28 million, up from €5 million in 2009.

Fon also builds technology directly into its telco partners’ CPEs, such as BT in the UK, MTS-Comstar Russia, SFR France and ZON Cable Portugal.