Optical/IP Networks

Telseon Scores $175M in Funding

When Telseon announced the successful completion of a $175 million third round of funding today, it was hard not to conclude that Ethernet-based service providers have got something special.

After all, it was only yesterday that Yipes Communications Inc., one of Telseon’s main rivals, itself announced the closing of a $200 million round (see Yipes Closes $200M C Round).

Both companies, however, say that raising this much money has been a long, hard slog. “We started looking at financing back in April,” says John Kane, Telseon’s CEO. “And we really got busy in midsummer. Then no one could find the floor when the bottom fell out of the capital markets, so we had to wait until the end of the year.”

Much the same appears to be the case with Yipes, which announced that it had raised $139 million last October and has now increased this to $200 million to close out its C round.

In terms of total funding raised, Telseon now has $261 million compared to Yipes’s $291 million. A third player offering Ethernet-based services, Cogent Communications Inc., boasts a total of $396 million, although $280 million of that is in the form of vendor financing from Cisco Systems Inc. (Nasdaq: CSCO) (see Next Gen Carriers Cash In).

Yipes makes a big thing out of having no vendor financing, although some of its investors are equipment providers. Scott Kriens, the CEO of Juniper Networks Inc. (Nasdaq: JNPR) participated in the latest round, according to Ron Young, a founder of Yipes and its chief marketing officer. A prominent Ethernet switch vendor is also an investor, Young adds, although he declines to identify it. The latest round was led by Charter Growth Capital.

A couple of equipment vendors -- Cabletron Systems Inc. (NYSE: CS) and Foundry Networks Inc. (Nasdaq: FDRY) -- participated in Telseon’s latest round. The lead investor is DLJ Global Communications Partners, the telecommunications investment arm of DLJ Merchant Banking Partners (an affiliate of Credit Suisse First Boston).

Previous Telseon investors Goldman Sachs & Co. (NYSE: GS) participated in the latest round -- appearing to indicate that an IPO may be in the offing. But Kane says he is content as a private company for the moment. “If you would have asked me 12 months ago, I would have said that we’d be public by now,” he says. “But things are different now, and it’s difficult to get out there. Besides, once you are public it changes your competitive edge, because you always have to be worried about making sure you don’t miss your numbers.”

According to Kane, the current investors are happy about the longer-term approach. “We didn’t want investors who were looking for a quick flip,” he says. “We wanted investors who were willing to go deep in their pockets to write more checks in the future. In today’s market you have to look for investors who are willing to go two or three rounds with you. They may be the only ones you can find to fund you.”

-- Marguerite Reardon, senior editor, and Peter Heywood, international editor, Light Reading http://www.lightreading.com

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sunnyD 12/4/2012 | 8:56:39 PM
re: Telseon Scores $175M in Funding whats up with OnFiber ? Have they folded operations, i hear they did but i am not sure. If they did then that will be the first high profile "ethernet clec going out of business" case ?
bear 12/4/2012 | 8:56:37 PM
re: Telseon Scores $175M in Funding i doubt onfiber closed its doors. they are not an ethernet clec like yipes. i saw them at the cibc conference last month and they looked very impressive. they are probably staying low key but i suspect they have a lot going on
light_on_dude 12/4/2012 | 8:56:37 PM
re: Telseon Scores $175M in Funding I thought they were just another level in the KP optical pyramid?
mike38 12/4/2012 | 8:56:37 PM
re: Telseon Scores $175M in Funding they have bought new gear from ONIS recently ...they DO have a lot going on...
tryit 12/4/2012 | 8:56:36 PM
re: Telseon Scores $175M in Funding Are you sure OnFiber is doing Ethernet ?
bear 12/4/2012 | 8:56:34 PM
re: Telseon Scores $175M in Funding if you know more, pls indulge us. i here they are the sleeping dragon. kp doesn;t seem to have any other optical service deal so i imagine they are putting their weight behind this one. is vinod khosla on their board?
Peter Heywood 12/4/2012 | 8:56:29 PM
re: Telseon Scores $175M in Funding Bear:


Peter Heywood 12/4/2012 | 8:56:27 PM
re: Telseon Scores $175M in Funding I have it on good authority that (a) Onfiber is alive and still in stealth mode, and (b) is not not going to be morphed into KP's BBO-the-sequel project, even though KP is Onfiber's first round backer.
krybak 12/4/2012 | 8:56:25 PM
re: Telseon Scores $175M in Funding Isn't Aduronet another GigE player? I've heard rumors that they are going out of business, though. Is that true?
krybak 12/4/2012 | 8:56:25 PM
re: Telseon Scores $175M in Funding Isn't Aduronet another ethernet player? I've heard rumors that they are going out of business though. Is that true?
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