Polaris Platform Scores With VCs

Polaris Networks, which develops optical transport switching systems for metro core networks, announced today that it has closed a $52 million funding round (see Polaris Pulls In $52M).

This round comes in addition to the $22 million Polaris raised when it was founded in June 2000, bringing its total funding to $74 million. The San Jose-based company says the funding will last it through initial product development, carrier trials, planned technical certification, and commercial delivery.

The funding round may seem healthy, but it is a modest one by optical switching standards. Experts say the company will likely require more funding to complete its mission.

“That’s probably enough to see it through product development and data trial,” says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading. “But it’s hard to build a box like that for less than $120 million. It can be done, but it’s certainly hard to do.”

Clavenna notes that Polaris's product is ambitious: It combines an optical transport platform with grooming and switching, all of which is managed through a GMPLS (generalized Multiprotocol Label Switching (MPLS))-based common control plane. The architecture is designed for native support of TDM, cell, and packet traffic using a single, software-defined switching fabric (see Polaris Builds a God Box). Next will come the hunt for a top-tier customer. Big IXCs have traditionally been reluctant to buy from startups without proven track records, and in today’s financially difficult environment they definitely won’t be any less cautious.

Polaris officials noted the difference between raising money the last time -- in August 2000 -- versus raising money today.

“The last round took us about three days,” says Ray Kao, Polaris CEO and CTO. “But with this round, every investor took at least 50 man-hours of our time. There was lots of due diligence.”

Despite the current caution of venture capital firms, Polaris received funding from both new and previous investors in this round, actually pulling in $17 million above its aim of $35 million.

A new investor, Advanced Technology Ventures (ATV), led the latest funding round. Firsthand Capital Management Inc., Granite Global Ventures, KTB Venture Capital, Pac-Link Management Corp., Presidio Venture Partners, Riverside Management Group Inc., Western Technology Investment, and WK Technology were also new investors in the round. Previous investors Redpoint Ventures, Venrock Associates, and Storm Ventures also participated in the round.

The company claims that with its optical network architecture, known as iMON (intelligent Multiservice Optical Network), it can groom down to the VT1.5 level. The only other companies that can reach this level are Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), with its Titan, and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), with its 1631. But while they each need between 73 and 83 racks of equipment, Polaris is saying that it can do with only one box. This massive reduction in racks frees up space and promises to reduce operating costs enormously. Kao says that Polaris aims to provide four- to five-times reduced capital spending, and more than 10-times reduced operational spending.

“Polaris has much smaller granularity,” says Clavenna. “This is a phenomenal footprint story.”

Another thing that might have drawn investors to the startup is the fact that of the company’s mere 89 employees, more than 75 percent are engineers. With the recent rash of layoffs throughout the industry, investors are looking for companies with low burn rates that haven’t bloated up to an unmanageable size. Observers also say that the company’s management team is strong, with a good track record.

Polaris expects to start trials this summer and start shipping product by the fourth quarter. The company says it has four trial customers down for certain and claims to have a few more lined up. The trial customers are a mix of RBOCs, top-tier IXCs, and new-generation carriers.

— Eugénie Larson, Reporter, Light Reading
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millerlite 12/4/2012 | 10:46:52 PM
re: Polaris Platform Scores With VCs Good job guys!..its not easy to get funding in this market and that too without product and revenue....
ritefiber 12/4/2012 | 10:46:52 PM
re: Polaris Platform Scores With VCs Amen to cost and opex reduction!! At least there's one vendor out that understands the carrier's pain.

I heard most of the people at Polaris are formertly from Cisco/StrataCom. Apparently these have a decent engineering team.
gea 12/4/2012 | 10:46:47 PM
re: Polaris Platform Scores With VCs I met with the Polaris head honchos while they were setting up their offices. It was clear that they understood some of the big network issues, and had a decent idea of what GMPLS control plane technology could mean. In addition, Ray Kao's already sold a company to Cisco, and his posse are well-familiar with the startup world.

To be honest, I thought that the box they were trying to build was unbleivably ambitious, but if they pull it off they'll do extremely well.
millerlite 12/4/2012 | 10:46:45 PM
re: Polaris Platform Scores With VCs Atleast u can get money...to survive..!I don't
think the other 2 startups you mentioned have/had
good managment teams..look at BL..great product..
its works too...as far as I know, but management has no clue.....I think..its the management that counts in the END..esp in a market like this...

knave 12/4/2012 | 10:46:45 PM
re: Polaris Platform Scores With VCs

Just out of healthy skepticism, what makes you think that Polaris will suceed ? What differentiates their box from Mahi, BL,and others?
It's a real thin market...how will they get the "traction" that others couldn't? Team can be great , but the game sucks right now...
knave 12/4/2012 | 10:46:44 PM
re: Polaris Platform Scores With VCs
with all respect, sycamore was begun with players from a similar background which is not necessarily viewed as a plus by the telco crowd. As far as management teams, cluelessness, etc. I beg to differ. what is happening now , in the market has nothing to do with management experience, I've seen score os MBA's incapable of reading markets and customers. isn't that the case right now? Did anyone forsee the condition of the market today? Do you think that Polaris stands a chance of getting a piece of the cisco ( cerent ) action ? The hurdles of getting a product of any substance to any of the six remaining carriers is unlike anything I 've ever seen and I 've seen too much. there was a trick to getting traction in the early eighties..only a few of us know and we're not sure it still works...
ritefiber 12/4/2012 | 10:46:44 PM
re: Polaris Platform Scores With VCs Execution is going to sift out the winners from the losers.

I just took a look at Polaris' website. Their founders both have proven track records of delivering carrier switches from Cisco/StrataCom
opticalguy 12/4/2012 | 10:46:44 PM
re: Polaris Platform Scores With VCs Knave,

You say: "Do you think that Polaris stands a chance of getting a piece of the cisco ( cerent ) action ?"

What makes you think that the Polaris product would replace the 454?? I think that you are confusing MSPP for MPLS! A cisco 15454 might be one application but you are way off from the feature presentation. Try shopping your little knowledge around someone elses market!
hitechguy 12/4/2012 | 10:46:44 PM
re: Polaris Platform Scores With VCs Ritefiber said:

"I just took a look at Polaris' website.
Their founders both have proven track
records of delivering carrier switches
from Cisco/StrataCom"

And exactly what were these people doing the
last several years while the Stratacom product
line languished? The Stratacom product line
was behind the industry leaders when Cisco
bought them. No substantial improvements
since then. No substantial new customers

Sounds like Polaris would do much better if
they had teams that could execute in building
innovative products.

realdeal 12/4/2012 | 10:46:43 PM
re: Polaris Platform Scores With VCs Polaris is not going after the Cerent/Cisco customer.

The main reason why we did not see improvements out of Cisco once they bought Stratacom is because Cisco was pushing IP and treated the Stratacom guys like they were the red headed step-child.

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