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Hammerhead Nails Another $30M

Craig Matsumoto
1/31/2006

Startup Hammerhead Systems Inc. announced today it's strengthening its push on the edge router market by picking up another $30 million in funding.

The round, Hammerhead's third, was led by Silver Creek Ventures and includes one new investor, Apex Investment Partners , along with Hammerhead's previous investors: Enterprise Partners Venture Capital , Foundation Capital , Mayfield , and Pequot Ventures .

Hammerhead has raised $80 million in three rounds. Its Round B, in 2003, started at $25 million and was supplemented with a $10 million extension about six months later. (See Hammerhead Nails $25M.)

Hammerhead officials were quick to say this was an "up" round -- that is, it doesn't represent an erasing of investors's previous stakes. (See Washed Out in the Valley.)

"It was a meaningful 'up' round," says Rob Keil, Hammerhead vice president of marketing and business development. "A significant chunk of that was from the four [prior investors] stepping up."

Hammerhead, founded to tackle the multiservice edge market, put most of its energy into hardware at first. The market's slow takeoff forced Hammerhead to make some changes, (See Hammerhead Retools MPLS Approach and Hammerhead Orders Dry Martini.)

Hammerhead "hopes to leverage carrier dissatisfaction" with multiservice switches, writes Heavy Reading analyst Scott Clavenna in "The Future of Multiservice Switching," a report issued in July. A survey conducted for that report found roughly 40 percent of carriers unhappy with the lack of Ethernet or Multiprotocol Label Switching (MPLS) support in multiservice switches. (See Switches Face IP Challenge.) Hammerhead's HSX 6000 tries to bridge the gap by adding MPLS and other Layer 3 "awareness," as company officials call it, to a Layer 2 box.

Round C will fund growth in Hammerhead's sales organization, as the company claims to be getting buyers signed up all over the place. Names? Numbers? Hammerhead still isn't talking. But Keil claims they've beaten out the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), Ciena Corp. (NYSE: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), Juniper Networks Inc. (NYSE: JNPR), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) in multiple vendors. Some of that success might have come from Hammerhead's partnership with Fujitsu Network Communications Inc. (See Hammerhead & Fujitsu Team up and Fujitsu OEMs Hammerhead Switch.)

"Now that we've validated we can sell this product and win against big companies, we want to expand the sales force," Keil says. That's going to mean a boost of at least 25 percent to Hammerhead's headcount of 80, he says.

— Craig Matsumoto, Senior Editor, Light Reading

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light-headed
light-headed
12/5/2012 | 4:07:44 AM
re: Hammerhead Nails Another $30M
that the VCs still can be fooled and there is still stupid money floating around out there. Good luck to HH but I don't see any carrier buying gear from a startup being resold by Fujitsu that isn't L1 focused (SONET/SDH).

I also don't think that getting into the MSS market at this time makes ANY sense as it is a shrinking market dominated by a few large vendors (ALA/NT) with a huge installed base, years of experience and tons of features already implemented. I am sure that the HH guys think they are addressing some great new opportunity that everyone has missed (been there done that - see tenor/maple/vivace/equip networks, etc.) but these windows always just fade away...
lightreceding
lightreceding
12/5/2012 | 4:07:44 AM
re: Hammerhead Nails Another $30M
"The edge router firm's Round C arrives as it claims to amass carrier wins for its MPLS and pseudowire wares"

Is that kind of like vaporwire wares? Why don't they announce a customer? Oh wait, they announced two new hires from Mahi. Is the "God" box back?
fiberous
fiberous
12/5/2012 | 4:07:43 AM
re: Hammerhead Nails Another $30M
HH is a runaway train. More money is being
brought in with a promise of better liquidity
preference to the new investors leaving the old
investors in a lurch. This will result in
holding out for obscene valuation to satisfy
everybody's return, including any carve outs.

Here is why its a runaway train: HH architecture
was conceived by Cisco/Stratacom folks. They
came in and put a great ATM/FR architecture to
address RBOCs to use their ATM infrastructure
to sell FR services. In those days FR services where mostly the dominion of IXCs and RBOCs were
vying to get in. Cisco had not bought this line.
So, the team came to HH following Rob.

Promptly after getting HH pregnant with this
baby the team returned back to Cisco.
Call it serendipity orcalculated move by Cisco -
they had put the first hole in Rob's sail.
Partly it was Rob's problem since he held a weird
role of CTO/CMO/Cheif architect all rolled into
one. Sort of the God figure the execs would have
to contend with.

The new team told HH they were full of it and
that the focus should be IXC and ability to sell
FR services and use MPLS infrastructure.
They cooked up some bull&&*( about BW being
liquid. This myrhh was sniffed and inhaled
deeply and the boys went into a trance.
We all know what happened to Sprint's FR
services and AT&T's Elambochi's dream.
The money ran out in the middle and they woke
from their dream all wet.

So, now HH needs more money to create the 3rd
version. Guess where the pundits are these days:
ACCESS. So, more money goes into some sort of
access box story.

Bottom line is this is another company directed
by misguided souls and employees who have no
allegiance to them other than salary and using
them to put a new notch in their resume. Most who
come to HH have never done anything like what is
being attemped at HH before.

I agree as along as there are VCs who salivate
at better liquidity and being on top of their
fellow VCs..HH will suck some more before you
see the bubbles around this tub.
tigre
tigre
12/5/2012 | 4:07:41 AM
re: Hammerhead Nails Another $30M
My question is whether Pete Savage and Kevin Pope are really qualified to be at the helm of a router startup

Neither have any background in this space and considering that no has lately been succesful in this space (except for the very well-qualified Timetra team)
startup_shutup
startup_shutup
12/5/2012 | 4:07:41 AM
re: Hammerhead Nails Another $30M
>> that the VCs still can be fooled and there is still stupid money floating around out there.

Why I am not surprised ....

People, there is a massive credit bubble out there and some JUNK startup getting 30 million round is NO NEWS for me

Moving on .....
straight shooter
straight shooter
12/5/2012 | 4:07:39 AM
re: Hammerhead Nails Another $30M
Thought I had seen those pics on the HH website before... They're fancy versions of old Stratacom slides (with the prerequisite integration of new acronyms and buzzwords)...

The more things change, the more they stay the same... Zzzzzzzzz....
startup_shutup
startup_shutup
12/5/2012 | 4:07:37 AM
re: Hammerhead Nails Another $30M
>> Maybe they can throw some my way:)

This has been happening in SILLY CON VALLEY for long time.

In the pretext of forming startups, VC buddies has been sucking capital (out of massive credit bubble perpetuated by Alan Greenspan).

I have said many times before and will say it again ...

This 30 million that was given to Hammerhead should have gone to ASIA ... VC faith in SILLY CON Valley is MISPLACED ...
ATMRules
ATMRules
12/5/2012 | 4:07:37 AM
re: Hammerhead Nails Another $30M
It's Hammer Time....Rumor has it they've landed SAVVIS....OK, so what?? one customer does not make a company. Do you think SBC, Verizon, AT&T(SBC), BellSouth and Quest are just going to forklift all those ATM/Frame Relay switches from Cascade, Nortel,Cisco and Ciena ( WaveSmith DN 7000 series, yes SBC and Verizon have quite a few of those) to put in the pseudo wire thing? I know one thing I like to be good friends with those VC's who are just throwing $$$ at HH. Maybe they can throw some my way:)
firstmile
firstmile
12/5/2012 | 4:07:35 AM
re: Hammerhead Nails Another $30M
Tiger,
There is no question about Savage...he is NOT qualified. You have to be a tired VC to be convinced that Savage is:
1. Someone that understands what RBOCs are doing today (not 15 years ago)
2. Someone that has the eye of the "tigre" to see something to completion (today, not 15 years ago)
3. Someone that is a TEAM player. The saying that I have heard to decribe Savage is as follows, "What's good for Pete, is good for Pete"

Don't worry about Kevin's abilities. If the CEO is weak the company is dead (or at least a member of the walking dead)
...first
fiberous
fiberous
12/5/2012 | 4:07:33 AM
re: Hammerhead Nails Another $30M
Sounds like the VC community has their act
together.

Guys, please check whether you are fully dressed
and covered before you go for a morning walk!
Not very flaterring.

Your no example to get excited about,,,shrinking
factor was already estabslished for you
in the industry. The ratio is pathetic and
tries to prop you (artifically) morally up.

Nanu Nanu.

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