Force10 Rakes In $41M

The venture capital environment still has some life left. Today, Gigabit Ethernet switch startup Force10 Networks Inc. announced it has closed a $41 million C round of funding, bringing its total to date to $209 million (see Force10 Puts $41M in the Bank). Impressive? In this environment, it’s definitely something to brag about. While many startups of the same size and age are cutting staff and struggling to keep their doors open, Force10 has been ramping up its sales force and announcing new customers (see Force10 Wins in Amsterdam and Headcount: Meet My Shareholders?). The company has done well selling to universities and research facilities and is now making a push into large enterprises and Asian service providers. Steve Mullaney, vice president of marketing for the company, says the newly banked $41 million will be used to ramp up production of its 10-Gigabit Ethernet E1200 switch.

No new investors contributed to this round of funding. But all the previous investors participated, including New Enterprise Associates (NEA), U.S. Venture Partners, WorldView Technology Partners, Amerindo Investment Advisors Inc., and Pacesetter Capital.

The last time the company received funding was in July 2001 when it got $95 million. This latest round will fully fund the 225-person company, which is expected to reach cash-flow break-even by the end of year, says Mullaney. But he also adds that the company, which now has 20 paying customers, would have been able to achieve its financial goals with only $25 million in additional funding.

“If you can get money in this kind of environment, you take it,” he says. “It’s nice to have a buffer. You just don’t know what’s going to happen to the market and the economy in general. It’s better to be safe than sorry.”

Although he wouldn’t discuss details, Mullaney says that the company’s valuation has taken some hits. But he is encouraged that it has maintained its value as much as it has over the past year and a half.

Force10’s Ethernet switches go head to head with gear from Cisco Systems Inc. (Nasdaq: CSCO), Extreme Networks Inc. (Nasdaq: EXTR), and Foundry Networks Inc. (Nasdaq: FDRY). Just last month Force10 challenged its competitors to a pricing war when it announced it was slashing prices on its 10-Gbit/s Ethernet interfaces by as much as 44 percent (see Force10 Slashes 10-GigE Pricing).

— Marguerite Reardon, Senior Editor, Light Reading
BobbyMax 12/5/2012 | 12:35:33 AM
re: Force10 Rakes In $41M Force has acquired over $250Million during its four years of existence. The way company is presenting itself, it appears that the company and its VCs are positioning the company to be acquired.

Force10 has reduced its prices by as much as 40%. This is an unlikely strategy for a company that wants to stay in business.

Force10 is in a tough position as there a multitude of companies that are public and well established.

The company has not published any data on product distinction. It has also not published any data on interoperability.
M_Eisenberg 12/5/2012 | 12:35:06 AM
re: Force10 Rakes In $41M Hey BobbyMax,
When was the last time you reviewed the Force10 Website - you're spending too much time here...

In case you forgot:

As well, we're fully interoperable with all the other networking vendors.
gea 12/5/2012 | 12:35:05 AM
re: Force10 Rakes In $41M "Hey BobbyMax,
When was the last time you reviewed the Force10 Website - you're spending too much time here..."

You must be new here. BoobyMax is notorious for not bothering lifting a finger to determin anything resembling a "fact". In fact, if you search the archives, you'll see that he often doesn't even read past the first paragraph of the Lightreading article before making some absurd pronouncement.

Here's Booby ranting on the uselessnes of higher bandwidth in the local loop, apparently unaware that the article was about a backplane manufacturer:

PacketProtector 12/5/2012 | 12:34:47 AM
re: Force10 Rakes In $41M How does a company that has 225 people, makes high end ASICs and apparently only sells to the Grid/Supercomputing market get to break even this year? That's a heavy burn rate for such a tiny vertical.

The only customers they've announced are a couple of Universities and some clustering types. Now they've slashed their prices in an obvious move to try to get some market share, further eroding their margins.

These guys need a significant deal with an ILEC or PTT to have a chance, and last I checked they weren't spending much, especially on start-ups. The big PTT's in Asia are famous for buying 1 of everthing, so maybe they've got a few dollars there, but I'll bet it's not much. They're dreaming if they think they're going to sign up Enterprises, they are overkill and waaay too risky.

I think BobbyMax is right, looks like Force10 is hoping to get bought. And I bet this round was a washout.
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