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Startup Exercises Phoenix Option

Light Reading
News Analysis
Light Reading
8/10/2000

A good idea's worth saving: That seems to be the concept behind Zebulant Systems Inc., a stealth-mode startup that's risen from the ashes of an earlier project.

Zebulant is interesting on a number of counts: First, it's the reincarnation of Capillary Networks, a company that lost its funding early in June, after the founders reportedly clashed with executives hired by their VC, Sequoia Capital (see Capillary Bleeds Out).

Second, Zebulant's interesting because its new CEO, Nolan Daines, recently left a full-time job at World Wide Packets, the gigabit Ethernet startup founded by his brother, Bernard Daines.

According to Bernard, Nolan wasn't enamored of his original post as COO of World Wide Packets. So he took some time off, retaining a position as "advisor video solutions" at World Wide Packets. Then, the Capillary refugees rang. "This opportunity popped up independently, and he decided to go with it," Bernard says.

Bernard insists he didn't quarrel with his brother, despite rumors to the contrary: "I've had no disagreement with Nolan. I support his move fully. Our work will be complementary. Don't forget we worked together for 11 or 12 years."

Still, Bernard admits he isn't crazy about Nolan recruiting competition in the small job market in Spokane, Washington, that both Zebulant and World Wide Packets now call home. "You could look at that both ways," he says.

According to Bernard, Nolan has secured funding and (for better or worse from Bernard's viewpoint) is busy recruiting. Nolan himself refuses to talk, saying he's not yet ready to reveal much about the new startup.

Which raises the question: What's Zebulant up to? Originally, Capillary's charter was to create a "next generation" content-aware IP switch to compete with the likes of Alteon WebSystems Inc. (Nasdaq: ATON), which was recently sold to Nortel Networks Corp. (NYSE/TSE: NT) for roughly $7.3 billion (see Nortel Buys Alteon for Big Bucks ); and ArrowPoint Communications, bought by Cisco Systems Inc. (Nasdaq: CSCO) for about $5.7 billion (see Cisco Finds A Soft Spot for ArrowPoint).

At present, it's not clear whether that strategy may have changed -- nor what members of the original Capillary management team remain to carry it out. Bernard Daines says that G. Pandian, a Cisco veteran who headed up Capillary, is gone. (Pandian did not return calls.) The Capillary team also included CTO Sundara Ganesh, formerly of Bay Networks and Packet Engines.

-- by Mary Jander, senior editor, Light Reading http://www.lightreading.com

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