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Coriolis Shuts Down

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
Vendor Access CLE MSPP MSTP MSSP Core STS1/ VC4 Switch Product Breadth (1-5)
Nortel OPTera Metro 3100 OPTera Metro 3400, 3500 (Sonet); OPTera Metro 4100/4150 /4200 (SDH) OME 6500 OME 6500 OPTera Connect HDX 5
Coriolis OptiFlow 1000 OptiFlow 3000 n/a n/a n/a 2
Source: Heavy Reading

Access CLE: access customer located equipment
MSTP: multiservice transport platform
MSSP: multiservice switching platform


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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allidia 12/5/2012 | 2:39:01 AM
re: Coriolis Shuts Down Anyone know if they were approached inlate 2000 by Siemens?
fiberous 12/5/2012 | 2:38:59 AM
re: Coriolis Shuts Down Bob Castle is not unique. However, I dont
blame him. I blame the investors who drove
him to raise more and avoid wash outs.

It really all starts with the investors , the
board and the CTO.
If they are clueless then they will hire
a CEO who is clueless and he/she hires a more
clueless management team so that they dont
know that he/shee is clueless and pretty soon
the stuff starts to drip and slide down
all over the place!
Pearl 12/5/2012 | 2:38:55 AM
re: Coriolis Shuts Down What exactly are you trying to say... how many brews have you had anyhow? What does the CTO have to do with this? This is about VCs who have no operational experience. The Coriolis management wasn't clueless from what I hear, just not able to influence their stupid lead VCs from the last round to take a logical approach to finding a successful exist for the company.
now_more_than_ever 12/5/2012 | 2:38:54 AM
re: Coriolis Shuts Down How many circa 1999 startups are left ? It seems like a distant memory ...
Pearl 12/5/2012 | 2:38:53 AM
re: Coriolis Shuts Down Let's see, there's (probably includes 2000 too)...
MOVAZ
LANTERN
LUMINOUS
WHITE ROCKS
ATRICA
TURIN

Can't think of any more...
lightmaster 12/5/2012 | 2:38:53 AM
re: Coriolis Shuts Down This shutdown is not about stupid VCs or stupid management. It is a simple equation. VCs have put over $80M into this company, and have given them 4 years. That's an incredible amount of time for a starup to go without breaking through. Now the investors are being asked to put even more money in on the CHANCE that this 4 year old technology will provide them with a financial gain. Would you put your money in?

whyiswhy 12/5/2012 | 2:38:51 AM
re: Coriolis Shuts Down ...because it was most likely written off awhile back. The issue is the next $XM (presuming a washout of the existing investors) until the place breaks cash flow even. Zero base it.

Customers (check), product (check), market upside (uh, get back to you).

Having said that, I agree that financing a marginal business has got to be a lot less riskier than some wireless-bio-nuclear-anti-terrorist fast acting errection pill with nano-technology GPS locator.

But that's why VCs (and the limiteds that give them their money) is stupid!

-Why
truelight 12/5/2012 | 2:38:51 AM
re: Coriolis Shuts Down Atrica is the best Ethernet only player with over 30 customers.

Turin is the best SONET MSPP player with over 70 customers.

Movaz has a good low cost DWDM play with 20+

Don't know much about the others. Coriolis with only 4 customers is not good for them ot their investors is they have been going since 1999.

ATMRules 12/5/2012 | 2:38:50 AM
re: Coriolis Shuts Down Why do we need a VP of Human Resources in a startup?....I thought startups were not big on titles....and the one at Coriolis...one word...

USELESS>>>>>>>> WASTE OF VC MONEY...you could of hired a contractor to do that job...not some old timer with ties to the CEO from former employment....

ATMRules.......
ATMRules 12/5/2012 | 2:38:50 AM
re: Coriolis Shuts Down The problems is/was..not enough revenue...duhhhh even the VC's can figure that one out........why keep putting money into this company with only 4 customers? 4 years and $80+ million....c'mon...I'm sorry people lost their jobs but in reality consolidation in the industry is good...too many startup's chasing to0 few customers....9 out of 10 startups fail in any field not just telecom...it's not 1999 anymore....

At least they lost their jobs now and not a year ago...good luck to all...

ATMRules.....
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