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January 21, 2004
Coriolis Networks Inc. closed yesterday, a little more than a month after announcing its largest revenue equipment deployment to date (see West Looks East ...). The Sonet multiservice provisioning platform (MSPP) maker says its board decided to pull the plug after it was unable to get a funding commitment from venture capitalists.
Greg Wortman, formerly Coriolis's VP of marketing, says a consortium of banks are now meeting to decide what to do with the company's intellectual property. "Unfortunately our four customers are without any support from Coriolis," he says.
Those customers were energy subsidiary Vic Tokai (via reseller Nissho Electronics Corp.); Alaskan CLEC General Communication Inc. (GCI); Georgia-based Marietta FiberNet; and Ephrata, Pennsylvania-based D&E Communications Inc. The company also says it was on the shortlist of companies AT&T Corp. (NYSE: T) was considering in its latest multiservice access architecture request for information (RFI).
Whoa. Hold the phone. Why would a VC not want to invest in a company that already has a revenue-producing product, had an "in" at AT&T, and already has a reseller arrangement hammered out in Asia?
"[The VCs] were looking for more of a near-term exit strategy than they were able to see in the company," says Wortman. He says VantagePoint Venture Partners was the last firm that Coriolis had talked to regarding funding. Geoff Mott, managing director at Vantage Point, could not be reached for comment.
Perhaps another factor is that Coriolis didn't have enough customers and lacked a marquee account. In addition, its market perception was low compared to its competitors. In the overall results from Heavy Reading's equipment survey last year, Coriolis ranked 17 in the Sonet MSPP category and 18 in the SDH MSPP category (see Heavy Reading Surveys Telecom Vendors).
Finally, while the company had a unique MSPP, it lacked the wider next-gen Sonet product line that incumbent players hold dear. For example, the chart below shows how Nortel's Sonet products positioned against Coriolis's smaller lineup.
Table 1: Next-Gen Sonet Product Scorecard
Core STS1/ VC4 Switch
Product Breadth (1-5)
OPTera Metro 3100
OPTera Metro 3400, 3500 (Sonet); OPTera Metro 4100/4150 /4200 (SDH)
OPTera Connect HDX
Source: Heavy Reading
But maybe the real reason Coriolis couldn't find funding is because VCs didn't want to support the company's snack allowance, which it boasted of in an actual press release issued in January 2001. Here's a snippet of the release:
During this growth spurt between year-end 1999 and year-end 2000, headcount exploded from 24 to over 100 and expenses for employee dinners at the office swelled tenfold. The snack food consumption at this fiber-optics networking company mushroomed from $200 to more than $1,500 per month. The sales and service department progressed from non-existence to a staff of 18 in just four months.
"Some CEOs think the best way to grow a business is to raise more and more venture capital dollars," Corliolis CEO Bob Castle, was quoted as saying in that infamous press release. "I prefer to grow a company with a more conservative capital position to maximize the opportunity for shareholders to get a return on their investment."
Whatever the reason for its demise, the company's remaining 55 workers are jobless, and its backers -- which include TL Ventures, EnerTech Capital, Bessemer Venture Partners, New Enterprise Associates (NEA), and Columbia Capital -- aren't getting much of a return on the more than $84 million they invested.
— Phil Harvey, Senior Editor, Light Reading
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