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Dynarc in TroubleDynarc in Trouble

Swedish metro equipment startup has laid off most of its staff following collapse of fundraising efforts

October 19, 2001

3 Min Read
Dynarc in Trouble

Swedish metro equipment startup Dynarc appears to be in crisis following its failure to raise another round of finance.

The company laid off another 30 employees this week, in addition to the 50 or so in the U.S. that it laid off a couple of months ago. It now has only about 30 left, according to Frederic Thepot, the former director of technology at Dynarc, who lost his job in the first round of layoffs.

Dynarc's president and CEO, Olov Schagerlund, couldn’t be reached today. Sources said he was busy in meetings with investors, in an effort to put together a rescue plan.

Because of the way Swedish company law works, Dynarc isn’t likely to go bust altogether, according to Thepot. But, he suggests, it will end up being a much smaller engineering company with a different name and different customers.

Dynarc closed its last round of funding in February 2000, when it raised $55.4 million in a private placement of shares with U.S. and European financial institutions (see Dynarc Raises $55.4 Million ). This valued the company at more than $600 million. Dynarc's annual report for the year 2000 lists more than a dozen institutional investors, including Credit Suisse First Boston and Chase Manhattan Bank.

In the press release announcing the Feb 2000 round of funding, Schagerlund is quoted saying: “We are continuing to pursue the established plan of preparing the company for a stock exchange listing this year.”

When the IPO market went sour, Dynarc first tried to raise further cash in the U.S., according to Thepot. That didn’t work out, so it turned its attention to European sources.

Until recently, it looked as though NeSBIC CTe Fund, a Dutch VC firm, would come to the rescue. It led an effort to raise another round of funding, but, in the end, it wasn’t able to convince other investors to join it. “We have backed out,” NeSBIC research principal Naresh Sharma told Light Reading today.

Sharma is convinced that Dynarc had a rosy future ahead of it. “According to some customer calls we made, they were one year ahead of the competition,” he says. Unlike many metro equipment startups, it’s shipping products and has several customers. One of them, Sweden’s Song Networks, has placed an $18 million order for Dynarc’s equipment, which it plans (or planned) to use in 80 cities throughout Scandinavia (see Fortunes Swing for Swedish Startups ). Song wasn’t available for comment at press time.

Dynarc has also played an important role in efforts to standardize resilient packet ring (RPR) technology -- a way of slashing the cost of rolling out services in metro networks by eliminating Sonet and ATM equipment. Development of the RPR standard appears to have hit problems recently, which may have made it even tougher for Dynarc to raise the funding it needed (see RPR: RIP?).

— Peter Heywood, Founding Editor, Light Reading

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