Caspian Soaks Up $55M More
Caspian Networks Inc. received a $55 million infusion of venture capital for its “aggregation routing” and traffic shaping business, bringing its total funding to date up to $300 million (see Caspian Gets an Extra $55M).
Caspian CEO Brad Wurtz says the new funding will be used to increase the company’s sales, marketing, and customer service presence in the U.S. and Europe.
Caspian’s business comes mainly from Asia (60 percent), with lesser portions from the Middle East and Europe (30 percent) and the U.S. (10 percent), a mix Wurtz would like to be more evenly distributed. “We are very well staffed in Asia, and we will be making the majority of our investment in the U.S. and in Europe,” he says.
Caspian’s VC investors bet its "flow-based" traffic management routers will be hugely appealing now that so many different types of traffic are traversing converged IP networks. Caspian's gear can, for example, allow a network operator to recognize and assign “best-effort” service to P2P traffic, while reserving “mission-critical” bandwidth for real-time applications like VOIP and interactive gaming.
Wurtz says he expects the company to reach profitability in the second half of 2006, “depending on the markets.”
Caspian began life as a core routing company, but later retreated from the space in the face of stiff competition from larger suppliers such as Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR). The company now has focused its efforts on what it calls “aggregation routing” and its flow-state IP QOS systems.
“Our customers have told us that they want to use us in a different place in the network, at the aggregation points where they’re aggregating lots of edge devices and then shaping the traffic –- applying congestion control and QOS mechanisms –- before it goes over the MPLS core,” Wurtz explains.
But Caspian recently scored a substantial core routing win with the Korean government; and Heavy Reading analyst Scott Clavenna believes there may yet be room in the core router marketplace for Caspian (see Caspian Scores in Korea).
“The key thing to focus on is that core routing is actually coming back, globally, as operators move to VOIP and IPTV,” Clavenna says. “So they need real QOS in their core routers, and in some cases are looking outside the duopoly of Cisco and Juniper for that.”
But while traffic management is an important and growing focus in networks supporting next-gen applications, Caspian’s “flow-state” method of traffic management is just one way to do it (see Ellacoya Stands Alone).
“I do think flow-state routing is a very hot thing; the problem is there are some competing paradigms out there,” says RHK Inc. analyst Mark Seery.
Traffic management technology from Ellacoya Networks Inc. and Cisco use “deep packet inspection” to identify exactly what applications are generating traffic in the network. Caspian’s routers, on the other hand, take a more cursory look at the traffic, examining such things as its flow rate and packet size, Seery says.
“Ultimately I think the deep packet inspection that Cisco and Ellacoya are doing is what's really needed,” he says, adding that there is currently more market demand for deep packet inspection (see Ellacoya Sees Deep Packets at Shaw). “They [Caspian] are in a very interesting space, they’re in a hot space, but they’re really the only ones that are taking the approach they are taking.”
Caspian’s Wurtz says the new funding round comprised investments from the company’s existing VC partners, and was led by Oak Investment Partners, U.S. Venture Partners, and Morgenthaler.
"It’s unlikely they can recover the whole $300 million for their investors, but maybe they can get the $55 million back that they have just put in," RHK’s Seery says.
Caspian is headquartered in San Jose, Calif., and has offices in Research Triangle Park, N.C.; Tokyo, Hong Kong, Seoul, and London.
— Mark Sullivan, Reporter, Light Reading