Network Photonics Raises $106.5 Million
In a startup market filled with dozens of metropolitan access players, including well-funded public companies such as ONI Systems Inc. (Nasdaq: ONIS), the first question may be: Why now? But Network Photonics believes it has a new approach, and apparently the venture capitalists concur.
"This round [of funding] is enough for us to get a product to the market," says Steven Georgis, president and CEO of Network Photonics. The round was led by the Sturm Group, and was joined by New Enterprise Associates and U.S. Venture Partners, who earlier this year were the lead investors in the company's initial $10 million round of funding. Spectrum Equity Investors and Mustang Ventures also participated in the newest round, which totalled $106.5 million.
Network Photonics is coy on product specifics, saying only that it is working on an all-optical system that will "deliver managed wavelength services to metropolitan areas." Georgis says the company should have a product shipping to market "in a year's time."
Between now and then, the company has a lot of work to do, especially since it plans to build its own components, most of which will center around the company's proprietary DWDM (dense wavelength-division multiplexing) switching technology.
Georgis says that Network Photonics' strategic linchpin is its proprietary wavelength switching technology, dubbed CrossWave. According to Georgis, the company was founded on the idea of producing components based on the switching technology, which works without any optical-to-electronic conversions. Though the company may someday license its technology to other systems vendors, Georgis says that Network Photonics will initially try to slug it out with switch vendors like ONI Systems.
Building its own components, Georgis feels, will give Network Photonics greater control over systems design than competitors who are integrating off-the-shelf products. "Companies like ONI are limited in what they can do [in design], because they have to buy parts and integrate them." However, ONI has an advantage in that it is already shipping products, while Network Photonics is still only in slideware mode.
Network Photonics, which is headquartered in Boulder, Colo., also has facilities in Santa Rosa, Calif. (see Talent Search Sends Startup to Sonoma). According to Georgis, the company will produce components in its Boulder location, and manufacture systems in California.
Though Georgis admits the dual office structure adds a layer of management difficulty, it also gives Network Photonics a chance to hire engineers who might not want to relocate. "It's better to have [the management problem] than to have an incomplete staff," he says.
Georgis defends the company's decision to headquarter in Boulder, pointing down the road (literally and figuratively) to potential service-provider customers that may buy the company's products.
"We're the only optical-systems company in Colorado, and we're 25 miles away from half the [potential] customers on the planet," Georgis says, referring to the ever-growing group of service providers that call Denver home. "That gives us a little bit of home-town advantage."
With its latest funding round, Network Photonics also added some Rocky Mountain presence to its investor base, while keeping its national brand-name investors aboard. The Sturm Group, located in Denver, is a venture-capital organization that manages the private capital of founder Don Sturm. Sturm, an early investor in MFS Communications (which is now part of WorldCom Inc. [Nasdaq: WCOM]) and Level 3 Communications Inc. (Nasdaq: LVLT), was also part of a group that bought Continental Airlines (NYSE: CAL) out of bankruptcy in 1993; the group also has holdings in banking and real estate.
-- Paul Kapustka, Editor at Large, Light Reading http://www.lightreading.com