Caspian Prepares for an IPO

The significance of today’s announcement of an $85 million third round of funding for Caspian Networks isn’t hard to fathom. The startup is preparing the way for what could be one of next year's monster IPOs.

The clues are easy to see in Caspian’s press release (see Caspian Closes $85 Million 3rd Round). Wall Street institutions are playing a big role in financing the startup for the first time. In other words, they’re being given an incentive to get behind Caspian’s IPO and sell it to investors when the time is ripe.

The lead investor behind today’s announcement was Merrill Lynch & Co. Inc. (NYSE: MER), in conjunction with venture capital company H&Q Asia Pacific, SSB Capital Partners (part of Salomon Smith Barney) and ABN AMRO Private Equity (part of ABN AMRO

Caspian is viewed as a particularly hot startup by many industry insiders. It shares some of the same characteristics as Corvis Corp. (Nasdaq: CORV), which staged this year's biggest IPO.

Caspian has kept its technology under very tight wraps, just as Corvis has. And a lot of Caspian’s perceived potential is based on its founder, Larry Roberts, who’s got an incredible track record, just like Corvis’s founder, David Huber.

Roberts says he was one of the founders of the Internet, with a lot more justification than Al Gore. He worked on the Arpanet project that got everything started and played a key role in Telenet, the first company to develop and roll out X.25 packet switching equipment and services.

Light Reading has already taken a guess at what Caspian is developing (see Internet Pioneer Plots IP Revolution). In a nutshell, we think Roberts is re-inventing packet switching for optical networks. This involves developing edge and core switches, although the secret sauce is probably an innovative signaling protocol that enables Caspian to guarantee quality of service on networks handling a mixture of data, voice, and video.

So, when will Caspian stage its IPO? Back in September, Roberts told Light Reading that Caspian already had 230 staff and was planning a big publicity splurge next March, when he’d come out of stealth mode with product and customer announcements.

The current stock market climate may encourage Roberts to hang on a little longer before going for a flotation -- and this latest round of funding will help him do that.

-- Peter Heywood, international editor, Light Reading http://www.lightreading.com

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