Lights Dim at Latus
"We have great people, great technology, and great customer interest," Puglia says. "We've met our milestones and we've been under budget, but we've just run out of money."
To their credit, Latus managers told its employees a week ago that its future was uncertain. The announcement was made after a last minute attempt to secure a lead investor failed last Tuesday.
Now the company might go out of business, leaving its 125 employees jobless and without a severance check. But it might also find another company to buy its intellectual property, which would likely include Latus' core staff. "At this point we're encouraging people to cultivate their contacts and to be prepared for the worst while hoping for the best," says J. Michael Dugan, the company's founder and chief technical officer.
"Let me put it this way: the only thing my printer is printing this week are resumes," one Latus employee told Light Reading.
Latus, which was founded in March 2000, has received about $28.1 million in funding to date. The company started looking for additional funding in June, a little more than a year after it had closed its first funding round. While the company says it had several investors willing to commit more than $5 million a piece in new capital, what it lacked was an investor willing to put in $10 million to $15 million as a lead for a $30 million round.
As recently as a month ago, Latus managers say its investors and financial advisor - said to be Morgan Stanley Dean Witter & Co. - all provided their assurances that the company was on track and would be able to get the financial assistance it needed. Latus' investors include Hook Partners, Mayfield Fund, Sevin Rosen Funds, and Lightspeed Venture Partners (disclosure: Lightspeed is an investor in Light Reading). Dugan, Metera CEO H. Michael Zadikian, Sevin Rosen partner Jennifer Gill Roberts, Mayfield Fund's Todd Brooks, and Lightspeed's Barry Eggers sit on Latus' board.
As market conditions progressively worsened, investors began to pull back.
Latus was one of The Iris Group startups, a band of companies cofounded by Zadikian, who started Monterrey Networks. The other Iris startups include metropolitan optical equipment maker Metera Networks Inc., Iris Labs, and core switch maker Coree Networks Inc.
Last month, Light Reading reported that Coree was met with a similar fate as Latus -- it had all but completely ceased operations after it couldn't find funding (see Coree Cuts Back).
Though they were formed and funded separately, the Iris Group companies promoted a common network vision -- dubbed the Optical Data Network Hierarchy (ODNH) -- and common network management software. The gist of ODNH is that the core stays dumb and fast, network intelligence remains at the network's edge, and wavelengths are handled in larger groups so they're easier to manage (see Iris Group Shuffles Executives and Iris Group Unveils Network Architecture). While each product sold by each company is independent, there were supposedly operational advantages to be found by using more than one kind of product in the same network.
Latus, which was on track to ship a 2.56 Tbits/s DWDM system by mid 2002, was a crucial part of the Iris Group's network vision. Service providers had not yet begun testing Latus' product, but the company's managers insist that its technology was in good working order. "Our situation is purely a reaction to the economic climate and our inability to secure funds," Puglia says.
- Phil Harvey, Senior Editor, Light Reading