"Tapping Sycamore"
forbes.com
07.21.99
By Om Malik
Gururaj "Desh" Deshpande and Daniel Smith are like the Michael Jordan and Scottie Pippen of the networking equipment business. Everything they touch turns to gold.
Consider the success of their first networking company, Cascade Communications Corp. The company--which made Asynchronous Transfer Mode-related equipment--was started in 1991 by Deshpande, Smith and two others. By 1997 it had 900 employees and $500 million in sales. Cascade's technology was attractive enough for rival Ascend Communications to spend $3.7 billion to buy the company. (Since then Lucent Technologies (nyse: LU) has acquired Ascend.)
Deshpande and Smith split the $150 million in Ascend stock that they received in the buyout. A lot of multimillionaires would have taken it easy and enjoyed the life such riches afford. Not Deshpande. Quickly he was off to his native India a month after the Ascend deal closed, looking for investment opportunities.
The 49-year-old immigrant wanted to invest his newfound riches back home in the city of Bangalore, India's Silicon Valley. But the lure of starting yet another networking company brought him back to the corporate trenches. Seven months later he found himself back in Tewksbury, Mass., where he started Sycamore Networks. His idea was to build a high-capacity, optical-networking device that would use waves of light to deliver huge amounts of voice, data and Internet traffic through fiber optic cable to business and residential customers.
The problem Sycamore is addressing is that of increasing capacity in optical networks. Until recently, fiber optic cable could carry data at speeds of 10 billion bits per second. However, thanks to dense wavelength division multiplexing (DWDM) technology, the capacity can now be boosted tremendously. DWDM technology can be used to split the light beams, much like a prism, into 10 to 30 streams. This means that the capacity of a single cable can now be increased ten- to thirtyfold. It is now an essential piece of the new generation networks being put in place with companies like Williams (nyse: WM) and Qwest (nasdaq: QWST).
Sycamore wanted to build equipment that helps data flow onto optical cables and manages that flow. There was no business plan, just an idea, recalls Deshpande. While capacity for public networks is increasing, the offloading of data onto these networks is still a slow process.
"It took less than 15 minutes to line up the financing," he says. "Once you do a successful startup, it becomes relatively easy to get access to venture capital." Of course it helped that Deshpande pumped in $2.5 million of his own to fund the company. Matrix Partners pumped in another $2.5 million, and with a seed capital of $5 million Sycamore was in business.
Since then the company has raised an additional $35 million in three rounds from venture capital firms such as Northbridge Venture Partners, Amerindo Investment Advisors, Bowman Capital Management, Integral Capital Partners and Pequot Capital Management. It also has moved offices to a plush, new 35,000-square-foot facility in Chelmsford, Mass.
Deshpande recalls an interesting story on how the company got its name. One Sycamore Networks executive mistook a pair of maple trees outside the company's offices for sycamores and decided that it might not be a bad name for the company to have. If he knew his botany, jokes Deshpande, the company might very well have been named Maple Networks.
Next page...http://www.forbes.com/tool/html/99/jul/0721/featb.htm
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Mohan, I certainly do remember Cascade. Sycamore has been on my watch list for since the begining of the year. Didn't think they'd IPO so soon-BWDIK. When you find a way to get in on the IPO be sure to contact me first!<g>
Cheers,
dkg |
