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Optical/IP

Maple on the Money Trail

Maple Optical Systems, a startup developing a multiservice switch, has managed to raise a fourth round of funding without generating any revenue yet.

Such a feat used to be commonplace in the optical networking industry, but over the last few months it seems the only startups still getting any money are those with revenues.

Maple has closed the first part of its D round, and sources familiar with the company say it has raised roughly $11 million already. The company is expected to close the round with as much as $25 million. Atul Kapadia, the company’s CEO, wouldn’t discuss specifics of the round, but he did say that the money raised should be enough to sustain the company until it begins generating revenue late this year or early next year.

“I’m planning for the worst,” says Kapadia. “So we are executing very conservatively.”

The company had already slashed is headcount in February (see Maple Continues to Shed). Bringing it down from a peak of 150 in the beginning of 2001 to about 77 employees today. With such a small staff already, Kapadia says he doesn’t anticipate any other cuts in the near term.

The only firms involved in the round so far are previous investors. Charter Venture Capital, which first invested in the company’s C round last August, has taken the lead (see Maple Nabs New Funding). While many of the investors are already on board, some have chosen to stay out of this round, says Kapadia. The only holdout he would name was Technology Crossover Ventures. “Late-stage investors who invest only after a company has revenue will not participate in this round, as we are still a few months away from revenue,” he concedes.

In the past, the company has received funding from several venture firms, including Raza Foundries, which put up $9 million of seed money to start the company in 2000, Charter Ventures, Leapfrog Ventures, Firsthand Capital Management Inc., Siemens Venture Capital (SVC), Deutsche Bank AG, Texas Pacific Group, Aurora Technology Fund, McQuillan Ventures, RBC Dain Rauscher Inc., and Amerindo Investment Advisors Inc.

In previous rounds, these firms put in a total of over $100 million in capital. But firms that invested early and are pulling out now will likely see their stakes in the company significantly diluted.

Kapadia is confident that revenues are just around the corner and that this will spur some firms to pick up on their investments once again. The company, which is building an Asynchronous Transfer Mode (ATM) switch that also supports Multiprotocol Label Switching (MPLS), is already engaged with three major carriers, a U.S. regional Bell operating company, a European PTT, and an Asian incumbent local exchange carrier, says Kapadia.

He claims that what sets his company’s product apart from other ATM switches is the fact that it supports both PNNI signaling, used in ATM networks, and IP routing protocols used to support MPLS. He also says that all the product’s ASICs (application-specific integrated circuits) have come back from the foundry and are being tested for performance. The company is now working on software and hardware integration.

The experiences of other startups in this market suggest that Maple faces an uphill battle. Gotham Networks, which was developing a similar ATM-plus-MPLS switch, has been shut down (see Gotham Networks, MIA). And WaveSmith Networks Inc. has postponed adding MPLS to its ATM switch, saying carriers don't want it right now (see WaveSmith's Multiservice Surprise).

Whether this is true will become evident when Maple tries to turn its customer trials into actual revenues. Kapadia is confident that the company can make it happen, but he realizes that for Maple to survive in the long run, it will have to pair with a bigger vendor to provide a larger sales channel and customer support. The 77-person company, 69 of whom are engineers, does not have the infrastructure to support large customers and drive new sales.

“It’s expensive to build a sales channel,” he says. “It doesn’t make sense for us to do it ourselves. M&A is out of the question, but we will definitely have to partner.”

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing this very topic at Opticon 2002, Light Reading’s annual conference, being held in San Jose, California, August 19-22. Check it out at Opticon 2002.

Register now and save $500 off the registration fee. Just use the VIP Code C2PT1LHT on your registration form, and deduct $500 from the published conference fee. It's that simple!

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docsisdude 12/4/2012 | 9:59:12 PM
re: Maple on the Money Trail given the number of people who have left, i'm suprised its still going. I must say Atul's done a good job keeping this going and given the market, raza's moved up a notch in my eyes.
oc3076 12/4/2012 | 9:59:11 PM
re: Maple on the Money Trail i did not give this company 1/1000 chance of surviving for more than 3 months when they did the layoff in march and brought the young ceo. the odds are still against them since the customer base is crumbling. yet if they indeed have traction with international carriers and are in the atm/mpls space, this could be the story of 2003. yes, hats off, atul kapadia has done a good job of holding this ship together and raising new cash. any views on basic drivers of why carriers are upgrading their core atm networks?
light-headed 12/4/2012 | 9:59:07 PM
re: Maple on the Money Trail GǣLate-stage investors who invest only after a company has revenue will not participate in this round, as we are still a few months away from revenue,Gǥ

Yeah, right... a few months... that is a good one from Atul! How far is a few months from... NEVER.

TCV has it right.
Spaz 12/4/2012 | 9:59:04 PM
re: Maple on the Money Trail docsisdude and oc3076,

I hate to break up this A Tool love-fest, but this whole write-up is pile of BS. A couple of the statements he makes are about as laughable as the spin he tried to put on the layoff in February. Remember that one? They cut staffing from 150 to 90, and his story is that most of them were support staff? Here's a couple of new ones. First point - they are a couple of months away from revenue. Are these guys even in a trial yet? Even if they are (doubtful) there's a lot of magic that has to happen to go from a SUCCESSFUL trial to revenue, and that takes more than a couple of months these days. Second point - M&A is completely out of the question? What startup these days wouldn't entertain a serious offer? Sounds like they are trying to play hard to get.

oc3076, you raise Maple's odds from 1/1000 to the story of 2003 based on a $10M round? Keep your day job, if you have one. I don't think you'll be doing any handicapping in Vegas.

Here's the reality. Any optical startup getting funding these days should be pretty big news. Yet, after a full day this article has only generated 3 postings before this one. The first two are either Maple management, VCs, or other sycophants trying to generate buzz to attract a suitor, and the third appears to either an (ex-)employee or at least someone who has met A Tool and knows what he's about. Sounds like not too many people care anyway.

spaz
joe_average 12/4/2012 | 9:58:05 PM
re: Maple on the Money Trail Oh my! What can you say about a CEO that states "no layoffs are planned in the short term" and then lays off people two days later!?
sanddune 12/4/2012 | 9:58:01 PM
re: Maple on the Money Trail How many got tanked anyway?
Spaz 12/4/2012 | 9:57:45 PM
re: Maple on the Money Trail sanddune wrote:

How many got tanked anyway?

-------------------------------------

Only 4 that I've heard of, but they might not be through yet. Still, that's already 5% according to A Tool's quoted numbers, which is probably low since this guy can't seem to make a factual statement to save his life.

spaz
light-headed 12/4/2012 | 9:57:35 PM
re: Maple on the Money Trail Where do these people come from and where do they learn their business ethics? I cannot believe that most CEOs and executives in the valley will just lie and think that is acceptable... but the Maple guys seem to have no problem with it.

It is easy to have good ethics and values during the good times, it is the real leaders that have them during the tough times. There are too many soft so-called "business" people from the easy 90s run that need to be weeded out of this business for good.
Spaz 12/4/2012 | 9:57:12 PM
re: Maple on the Money Trail light-headed wrote:

Where do these people come from and where do they learn their business ethics? I cannot believe that most CEOs and executives in the valley will just lie and think that is acceptable... but the Maple guys seem to have no problem with it.

It is easy to have good ethics and values during the good times, it is the real leaders that have them during the tough times. There are too many soft so-called "business" people from the easy 90s run that need to be weeded out of this business for good.

___________________________________________

I could have written your post myself. I have said many times that it's easy to lead during good times, but times like these are showing their true colors. And I don't think that people like what they see at Maple. The management's arrogance is only exceeded by their lack of ethics. These guys aren't qualified to lead a cub scout pack, let alone a company. And I think they are starting to reap the benefits of the seeds that they have been sowing.
BobbyMax 12/4/2012 | 9:48:30 PM
re: Maple on the Money Trail A number of readers have expressed their dismay about Maple Mangement not telling the truth. Many readers were not sure about the origin of these guys. Out of 6 guys representing the management 4 are from India( Vide their bibliographies).

The most significant thing that needs to be mentioned is that none of the guys in the management have experience in optical or any other kind of networking.

Nobody seems to know what the company is doing oe even worst no one knows what it is capable of doing.

There are so many prominent vendors in rthe Optical Switching Market, it is hard to predict the future of the company.

No public carrier in right mind buy any product from start-ups. It is hard which market is appropriate for them. May be no market is appropriate.
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