Axiowave Closes on $45M

Yes, somewhere in Startup Land people are feeling confident. Axiowave Networks Inc. has closed $45 million in a third round of funding, bringing its total raised to $96 million.

The Series C round was anticipated in reports on Light Reading as far back as May 2002 (see Axiowave on Track for More Funding), and CEO and founder Mukesh Chatter acknowledges the deal was done "some time ago." But he appears to want to start the year 2003 off with a bang, because he thinks Axiowave is close to announcing its first contract win.

"We just made the announcement... We wanted to get closer to actual customer traction," Chatter says. He says Axiowave has its product in several carrier labs and anticipates announcing a North American carrier customer win in the second quarter of this year.

Chatter says the only new investor is Argonaut Private Equity (no Web site), which co-led the round with former funder Gainesborough Investments. Other investors include Chatter himself, along with his Axiowave cofounder Ray Stata, and "other private investors."

In the past, Axiowave got funding from Madison Dearborn Partners and Soros Private Equity Partners, although these investors weren't listed in the latest group of backers.

While acknowledging this as a "down round," the CEO says, "We are lucky to have a round. We are very fortunate in our set of investors. They are true partners." [Ed. note: A down round means the company received an investment valuation lower than it received in a prior round, resulting in heavy dilution for previous investors.]

Chatter says mum's the word on what Axiowave's product actually is. Up to now, the most the startup's revealed about its wares is that they are optically based.

The news of such a large round in the depths of the telecom depression will likely have them chattering in the silicon hills of Massachusetts, where the serial entrepreneur is well known. His legend as a salesman grew when he consummated the deal to sell his previous startup, Nexabit Networks, to Lucent Technologies Inc. (NYSE: LU) for close to $1 billion in 1999 (see Lucent Loses Two Big Names and Lucent Cleans Up Core Routing ).

The most common descriptions of Chatter involve the three Cs: Cheerful, Charismatic, and Controversial: Cheerful, because the $45 million gives the bubbly CEO reason to smile; Charismatic, because he tells a good story. But skeptics emphasize Controversial, in reference to the growing disillusionment with the results of his last endeavor. Many Lucent insiders charged that the Nexabit product was not fully baked when Lucent purchased it, and Lucent has subsequently cancelled the product resulting from that deal (see Lucent Faces "Exodus of Nexabit Staff", Lucent Unveils Product Lineup, and Lucent Chops TMX 880). Was it Lucent's botched execution or Chatter's hype? It may now be a case for startup anthropologists.

Looking forward, Axiowave's only said that its gear will enable carriers to unify disparate networks and services, avoiding the cost of maintaining the multiple IP-centric and circuit-switched networks many carriers have wound up with as a result of recent buildouts.

One specific has been nailed down, though: The Axiowave product won't be a long-haul DWDM box. In April 2002, Chatter confirmed the layoff of "under 30" employees as a result of discontinuing a project involving an ultra-dense optical crossconnect switch (see Stealthy Startup Leads With Layoffs). At the time, Chatter said Axiowave backed away from the long-haul market in light of the discontinuance of the Xros product line from Nortel Networks Corp. (NYSE/Toronto: NT).

Axiowave will add 25 employees "slowly and carefully" over the next year, says Chatter. This buildup will come in the areas of sales, sales support, and systems and software engineering. Right now, Chatter says Axiowave has an employee roster "in the high 140s."

International markets may be a focus. The company already has a sales office in Japan, and it is starting to look at opening up shop in Europe.

Of course, Axiowave must put its mouth where its money is now. Still, Chatter is confident enough in his company's "traction" with prospective customers to say he doesn't think Axiowave will need another major infusion of cash. If a small round is needed sometime in the future, he says, it's likely that existing investors and possibly new ones will pony up.

— Mary Jander, Senior Editor, and R. Scott Raynovich, US Editor, Light Reading
graceful_restart 12/5/2012 | 1:16:38 AM
re: Axiowave Closes on $45M I guess its his fault that Lucent blundered.
zettabit 12/5/2012 | 12:49:52 AM
re: Axiowave Closes on $45M Axiowave is working on a large switching box that will combine core backbone IP/MPLS switching capabilities (such as provided by GSR 12000 or Juniper M160) with TDM circuit switching (such as the Ciena CoreDirector). It'll have all the traditional benefits often touted for such boxes: network unification, Terabit level scaleability, carrier-class IP core switching, etc.....

However, in an industry where GSR's are for sale on eBay, where the Juniper M160 or Avici boxes are only selling in handfuls, and where CoreDirectors have just been deployed and provide more than enough switching capacity for the next two years, WHERE IS THE MARKET.

I predict there will be some kind of trial deployment of a few nodes with some lead customer, but Axiowave is fundamentally building a box based on the hype of 2000, and for which a market will not exist until 2005 or later.

Too bad....
BobbyMax 12/5/2012 | 12:49:34 AM
re: Axiowave Closes on $45M It is surprising that Mukesh Chatter has been able to raise $45 million recently. Mukesh Chatter sold Nexabit to Lucent for a billion dollars but the product did not work at all. Lucent lost more than a billion dollar because nexabit's enormous misrepresentation of the product.Probably he will sell AxioWave for two billindollars.

Surprising, Surpring, and Surprising.
chechaco 12/5/2012 | 12:49:33 AM
re: Axiowave Closes on $45M It's not that that core router manufacturers, established and start-ups, have trouble selling their stories. It's that their stories are outdated. So, if someone will come with better story he/she will have a shot. Though question remains where it'll reach the target or miss it.
But I do believe that there's an opening in the core router market from technical and economical sides.
metroshark 12/5/2012 | 12:49:33 AM
re: Axiowave Closes on $45M Is this yet another core router? If it is, I can't imagine who in their right mind gave Axiowave another round of funding. Juniper and Cisco are having a hard time creating any revenue growth in core router sales. Customers have a choice of picking the core router product that fits their requirements from one of these vendors. Look at Avici, they have a very stable and scalable product but they are having hard time getting their revenue up to double-digit numbers. Pluris, Ironbridge and many other attempts to deliver similar products pretty much reached the same conclusion: the core router market is very small and not growing.
Lightmare 12/5/2012 | 12:49:33 AM
re: Axiowave Closes on $45M I can tell by the last post that you have no idea what is involved in selling a core or edge router to a service provider or carrier.

The edge involves a shorter sales cycle with high volume and lower margins while the core invloves endless meetings, technical reviews, customer feature requests, and months and months of sitting around and waiting for them to make a decision and sometimes the decision is to not make a decision in this market.

No stories, no smoking gun, no technical advantages amongst router vendors. All of the selling today is based on relationship selling and quite a bit of political bs.

"So, if someone will come with better story he/she will have a shot." - this isn't the used car lot behind Kohl's :)
indsavvy 12/4/2012 | 11:52:25 PM
re: Axiowave Closes on $45M Anyone heard anything about Mukesh's latest venture? Seems like there was hype after hype at the beginning of the year but nothing for six months. Given the state of capex and startups in general, seems like the dollars will eventually run out.
goingoutside 12/4/2012 | 11:46:00 PM
re: Axiowave Closes on $45M The lack of any news bodes badly for Axiowave. Like many of the startups over the past few years they're most likely withering away. There has been no news of any kind out of them since the funding announcement and who knows how real that news was. Is the money in the bank or is it related to meeting goals? Too many announcements over the past year or so have indicated that the $$$$ were in the bank only to find out that it was a little piece at a time.

Good luck to Axiowave but doubtful that we'll be hearing anything positive in the short-term. It's probably only a matter of time before the layoffs start and the wrapping up begins.

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