Solinet Systems Scores $93 Million

The feisty Canadian company draws a monster round -- and adds to the ranks of optical startups challenging Nortel

May 31, 2001

3 Min Read
Solinet Systems Scores $93 Million

Solinet Systems Inc., a Canadian startup originated by engineers from Nortel Networks Corp. (NYSE/Toronto: NT), has raised a record US$93 million in its second round of funding. The company's planning to build next-generation long-haul optical networking gear right in Nortel's backyard.

This afternoon, the company announced the round of funding will come from Altamira, Alta Partners, Bessemer Venture Partners, New Enterprise Associates (NEA), and WorldView Technology Partners.

The round also includes funding from some of the firm's optical and semiconductor component suppliers (names undisclosed).

Solinet Systems says it will use the funding to expand operations, marketing, and customer service in support of its product, which is scheduled for public unveiling this fall and field trials by year's end.

"I checked, and it's a record for funding of telecommunications sector firms in Canada," proclaims CEO Scott Marshall, ex-VP of service provider access at Cisco Systems Inc. (Nasdaq: CSCO), who joined Solinet Systems in February 2001 (see Solinet Gets CEO From Cisco).

Marshall's boast is based on data from Macdonald & Associates Ltd., a firm that tracks VC activity in Canada. According to that firm, the previous record for Canadian telecom VC funding was held by Innovance Networks, which scored $75 million in December 2000 (see Innovance Scores $75M ).

Solinet Systems has a lot in common with Innovance -- besides a big bank account. Both are based in Ottawa, with lots of ex-Nortel engineering talent. Both are on a similar track in terms of size (Innovance has 250 employees; Solinet has 202 and plans to have 300 by year's end and 500 by the end of 2002). And both are would-be competitors in the intercity optical backbone space where Corvis Corp. (Nasdaq: CORV) made an early bid.

By focusing on flexible optical transmission in the backbone, Solinet Systems also seems to share a vision of the future of optical networks that is similar to Innovance's. That vision is one in which gear is much more distributed than it is today, obviating the need for mega-DWDM systems and huge optical switches (see Kalkhoven's Five-Year Plan).

It's an ambition that calls for eliminating a lot of the complexity that exists at the edge of today's carrier networks, including Sonet gear. And that in turn requires new techniques and new technologies. These requirements could account in part for the unusually large sums companies like Solinet are commanding.

At this early stage, it's impossible to peg any differentiators, but Scott Marshall says his company's product will have "a full suite of network and service management solutions" that will enable carriers to configure wavelengths quickly. The product won't be a switch, he maintains, but will transport wavelengths at 10- and 40-Gbit/s.

Some industry sources scoff at the advantages of a big round of funding, saying that customers, not VCs, are what create a successful company. "That's true," says Marshall cheerily. "But the money allows us to do more. Now it's up to us to spend it properly."

- Mary Jander, Senior Editor, Light Reading

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