Xanoptix Lands Cash, Launches Product
Xanoptix Inc., a startup specializing in massively parallel transceivers, has scored $40 million in a second round of funding, bringing its total to $70 million (see Xanoptix Scores $40 Million).
Xanoptix says the money will be used to roll out a new line of optical transceivers, including the company's first product, a high-density transceiver announced last year (see Xanoptix Launches Transceivers and Xanoptix's Strange Story).
"This substantial round will take us through the next couple of years to cash-flow breakeven and perhaps even to IPO by the end of 2003," says CEO James Norrod.
Norrod says he won't use the money to add to the Merrimack, N.H., company's tiny staff of 50 or so employees. So far, he says there has been no need to grow much beyond this, nor to layoff any workers. "The management team and founders are intact," he asserts. Only a VP of sales remains to be hired.
Xanoptix's claim to fame has been a new method of combining integrated circuits with Vertical Cavity Surface Emitting Lasers (VCSELs) (see Surface-Emitting Lasers Threaten to Edge-Emitting Lasers for Intermediate Reach). By eschewing old-fashioned methods of linking the VCSEL to the electronic portion of the chip via tiny wires, in favor of "doing it all in the IC," Xanoptix says it's conquered a major hurdle to creating compact, high-speed transceiver chips for use in optical networks.
Xanoptix's new line is based on its flagship, originally dubbed the XTM-1 but now renamed the XTM-72, a single-connector 72-channel transceiver chip capable of an aggregate rate of 245 Gbit/s (72 channels of 3.4 Gbit/s each) at distances exceeding 1 kilometer. This chip can be used to create high-speed switch fabrics, links among routers and switches in high-speed networks, and links among line cards and the backplanes of network devices.
Now the company offers XTM-12, XTM-16, XTM-32, and XTM-48, each with a channel count corresponding to its name. Xanoptix says all the chips are based on the same manufacturing processes as the high-end XLM-72.
"We proved we could do the hard stuff first. Now our product suite addresses smaller customers with lower bandwidth requirements, too," says CTO John Trezza.
Both Trezza and Norrod acknowledge that prevailing economic conditions will make smaller-channel-count chips, particularly those with two and 12 channels, the most likely bestsellers for the next 12 to 18 months.
Xanoptix faces growing competition from established players such as Agilent Technologies Inc. (NYSE: A), as well as other startups, including TeraConnect Inc. (see Agilent Adds High-Density Transceivers and TeraConnect Ships 120 Gbit/s Modules).
Even though all the competitors can't claim channel counts as high as Xanoptix's, their ability to meet the current market demand will certainly challenge the startup to assert itself in this growing market.
It may help that Xanoptix has other sources of revenue: It's engaged in a series of agreements to license some of its technology for use by other vendors, including suppliers of passive and active components (see Xanoptix Teams With Alcoa/AFL, Xanoptix, US Conec Team Up, Xanoptix, Vitesse Combine on Switch, Xanoptix, Corning Demo Transceiver, and Xanoptix Goes With Mapics).
When Xanoptix burst on the scene last March, tongues wagged over the startup's origins. Xanoptix's Trezza admits he ruffled some feathers when he took his entire team wholesale from Sanders, a subsidiary of Lockheed Martin now owned by BAE Systems, a maker of electronic warfare and information systems.
There also were rumors that Xanoptix had been started by venture capitalists who were sore at being turned down as investors in TeraConnect.
Norrod and Trezza say this isn't true, that Xanoptix was founded prior to TeraConnect. Norrod's not willing to reveal the names of the original investors, though. "They were mainly individuals; there were no institutional investors," he says. "Those individuals prefer not to be named."
This round's investors include leader MMC Capital, as well as William Blair Capital Partners, EuclidSR Partners, Envest Entrepreneurial Investments, Optical Partners, and Corning Innovation Ventures.
— Mary Jander, Senior Editor, Light Reading