Optical/IP Networks

VCs Shine on Starent

Wireless router startup Starent Networks Corp. has notched up a further $25 million in VC funding, despite having an established carrier customer base to bring in the readies (see Starent Scores $25M).

Today’s cash injection takes the vendor’s total funding to $80 million and follows contract deals with six carriers worldwide (see Starent Wins at Verizon PR, Starent's Startup Double-Up, Rural Cellular Picks Starent, Starent Wins at US Cellular, Starent Wins Vivo Deal, and China Unicom Picks Starent).

New investors Focus Ventures and Itochu Corp. coughed up $8 million between them, while previous investors Matrix Partners, North Bridge Venture Partners, Highland Capital Partners, and Samsung Electronics Co. Ltd. (Korea: SEC) invested a total of $17 million.

CFO John Delea is keen to stress that today’s announcement is in keeping with the company’s initial financial plan.

“The money is being used to fund the company’s expansion in sales and service functions,” he tells Unstrung. “We are very much making the transition to real commercial deployments... We need more field support, and we also need capital to fund inventory builds and things like that.”

Delea claims that today’s investment will be the last: “We believe this latest round will be sufficient to take the company to cash-flow positive.”

Part of the cash will be spent on ramping up the vendor’s presence in Europe, a market it is yet to crack: “Our initial focus was to build the market in North America and Asia. We are now turning our attention towards Europe and expect to repeat our success there.”

Delea cites recent development in the region’s CDMA 450 market as a potential customer target (see CDMA 450 Seeps Into Europe and CDMA 450 Czechs In). “The 450MHz area in Europe looks very hopeful. We are continuing to work on opportunities there.”

Starent is now the lone startup operating in the wireless router space, battling against the might of incumbent vendors like Cisco Systems Inc. (Nasdaq: CSCO). Tahoe Networks and WaterCove Networks have both been acquired, while Megisto Systems Inc. has moved out of the market in an effort to distance itself from failed rival ventures (see Nokia Sweeps Up Tahoe, Alcatel Swallows WaterCove and Megisto Breaks Silence).

“Starent is fortunate that it has some deal traction to help justify additional investment, but the space is crowded and still somewhat ill-defined,” opines Ken Rehbehn of Current Analysis. “Additional funds are necessary to adapt the product as operators' requirements change and, more importantly, to support expanded sales and support activities. Starent is betting that it can compete on its own, without having to get acquired. Pulling in an additional $25 million in funding will give them a shot at winning the bet."

Wireless routers (a.k.a. GGSNs in GSM-derived networks, and PDSNs in CDMA systems) are packet core network devices. In their next-generation guises, these wireless routers add sophisticated service creation, billing, and IP traffic management capabilities to this strategic point in the network.

— Justin Springham, Senior Editor, Europe, Unstrung

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