Axiowave on Track for More Funding

Axiowave Networks Inc. has raised $37 million in new funding, and company officials claim it's near to raising another $8 million more to close a total of $45 in its third round.

The size of the round and the fact that the news wasn't volunteered by the company appear to be hopeful signs, although Axiowave's still in pre-product mode and has much left to prove -- in a market that seems clearly down for the count.

The startup's founder and CEO Mukesh Chatter, who gained fame in selling Nexabit networks to Lucent for nearly $1 billion (see Lucent Loses Two Big Names and Lucent Cleans Up Core Routing ), says he's hopeful. "We're just one company, and you can't gauge anything by that, but we are beginning to get good traction. We are making substantially more progress than we were with prospective customers even three months ago."

Much remains to be seen. Axiowave doesn't expect to close its round for another six weeks or so. Chatter says the new round is coming from inside investors that have previously kicked in funding, as well as some outsiders, and matters must still be sorted.

Chatter won't name names, but in the past Axiowave has gotten funding from Madison Dearborn Partners and Soros Private Equity Partners, as well as from a range of other sources, including Chatter himself.

Since its founding in May 2000, Axiowave has maintained a cloak of secrecy only broken intermittently. A month ago, for example, word of a layoff leaked out (see Stealthy Startup Leads With Layoffs), forcing Chatter to acknowledged that Axiowave had discontinued work on an ultra-dense crossconnect switch meant to be part of its product line. About 30 employees were laid off as a result. Chatter said yesterday that the census remains at about 150 and there are no further layoffs in sight.

Sources say Axiowave is making a partially optical multiservice core switch designed to compete with gear from Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Équipe Communications Corp., Nortel Networks Corp. (NYSE/Toronto: NT), and a slew of others (see A New Optical Taxonomy, page 9}).

Chatter says the new funding, when finalized, will be used to create a sales infrastructure to support beta testing and shipment of Axiowave's gear, due out later this year. Money will also be used to continue R&D.

Axiowave will not have a booth at this year's Supercomm 2002 trade show in Atlanta, however. "We'll be there seeing and meeting and talking, but it seems the idea of showing your gear in demos doesn't carry the weight it used to," Chatter says. The only thing that matters is to get a product into the hands of the right customers and get it working, he asserts. The rest will come.

— Mary Jander, Senior Editor, Light Reading
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