Denver Techie, That is significant news. Here is an article from Red Herring on Chromatis.
February 02, 2000
Chromatis sees green
By Phil Harvey, Editor
Redherring.com, November 25, 1999
As Wall Street continues to reward optical networking startups, venture capitalists are climbing over each other to fund the next hot equipment vendor in this space. One beneficiary of the craze, Chromatis Networks,
will next week announce a second round of funding totaling $38 million from Eucalyptus Ventures, Soros Private Equity Partners, Anschutz Family Investment Company, Chase Capital Partners, and Hambrecht & Quist's (NYSE: HQ) Access Technology Partners.
Chromatis has received $50 million of funding to date. Its first round of $12 million came from Communications Ventures, Crosspoint Venture Partners, Jerusalem Venture Partners, and Lucent Venture Partners.
The company's product, due to be released during the first quarter next year, helps local carriers selectively and efficiently alleviate the bandwidth
bottleneck that typically occurs between a long-distance carrier's pipes and a local carrier's "local loop" or "last mile."
Chromatis's product is installed at a local carrier's central office, where it sits on the fiber ring of the local loop. The technology lets service
providers deliver more bandwidth only to those sites that need it. "If carriers can't provide service to large and small customers cost-effectively, they're leaving money on the table," says Chris Nicoll, an analyst with Current Analysis, a technology analysis firm.
IT'S ALL IN WHO YOU KNOW
But having a great product is not enough. Carriers don't buy from firms they've never heard of -- they're more comfortable with incumbent equipment providers who can provide large-scale service and support. Chromatis, a babe in the woods, needs a partner.
Bob Barron, now in his fifth week on the job as Chromatis's president and chief operating officer, says getting the product launched is top priority.
Mr. Barron -- who was introduced to Chromatis by Crosspoint Ventures, an investor in Mr. Barron's former employer, Diamond Lane Communications (acquired by Nokia [NYSE: NOK]) -- says the company is using its new funds to beef up its direct sales and customer support units.
Chromatis is also in negotiations with a large networking equipment company that will help Chromatis sell to regional Bell operating companies, where having an incumbent relationship really helps. Mr. Barron says his company's new OEM partner, to be announced early next
year, also will help it provide sales and training support to customers and, eventually, sell its product internationally. Analysts say Ericsson (Nasdaq: ERICY), Tellabs (Nasdaq: TLAB), and others have product-line gaps
Chromatis could fill.
OPTICAL CRAZE
Though many optical networking products are still months away from having products on the market and customers who'll buy those products, investors on Wall Street and in the VC community can't contain their
enthusiasm. "It's become trendy to get into the optical space, just like it was earlier this year to get into the dot-com companies," says Mr. Nicoll.
That may be, says George Peabody, managing director at the Aberdeen Group, but the problem Chromatis is addressing -- providing bandwidth efficiently from the backbone to local loop -- is very real, and carriers are
aching to do something about it.
What may be a greater challenge for Chromatis is trying to stand out in a crowd where all up-and-coming vendors are enjoying an equal amount of
hype. Analysts say that with Optical Networks, Nortel Networks (NYSE: NT), and Ciena (Nasdaq: CIEN) offering alternate ways to improve metro-area networks, carriers will have a wide variety of solutions to choose from -- some more economical than others.
Regardless, few doubt whether investors will see mind-boggling returns from optical networking concerns. "There's a lot of armchair quarterbacking going on," Mr. Barron says. "But I think investors recognize that the metro networking arena is a market on fire. The big
guys don't have a solution here and there's an opportunity for someone else to be the next Cisco [Nasdaq: CSCO]."
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