Service edge routers: the challenges of start-ups

You often see lists of companies that have recently raised significant sums of money from the Venture Capital markets. We also often talk about the high attrition rate from companies who started up in the late 1990s just before the so-called telecomms nuclear winter.

I thought it might provide some insight to select one of the most interesting segments (it was for me anyway) for equipment start-ups in the USA – Service edge routers / switches and see how those companies have fared over the last few years.

There are sectors that attracted far more entrants than the one I’ve chosen to look at such as optical switches or Operational Support Software (OSS) for service providers. I may take a look at these later.

Below you can see a list of the companies I had noted operated in this sector. Please note that the BIG vendors such as Cisco, Alcatel and others are missing from this list as I was looking at true start-ups. Even now I notice that at least a couple of companies that are not on the list…

Note: If I found an announcement about the aquistion or closure, I’ve provided a link. It’s also interesting to see where the web site URLs have ended up by clicking on the company names!

Company   Status
Atreus   Still going
Ellacoya   Still going
Extreme Networks   Still going
Quarry Networks   Still going, Now Reefpoint
Amber Networks   Aquired by Nokia, 2001
ASC   Acquired by NSGDatacom, 2002
Laurel Networks   Acquired by ECI, 2005
Fore Networks   Acquired by GEC, 1999
Riverdelta Networks   Acquired by Motorola, 2001
Riverstone Networks   Acquired by Lucent, 2006
Spring Tide Networks   Acquired by Lucent, 2000
Unisphere (Redstone)   Acquired by Juniper, 2002
WaveSmith Networks   Acquired by Cienna, 2003
Allegro Networks   Closed down 2003
Asita Technology   Closed
Celox Networks   Closed, 2002 Spent $155
Coree Networks   Closed 2001
Corona Networks   Closed 2003
Equipe Networks   Closed 2004
Ennovate Networks   Closed 2001
Gotham Networks   Closed 2002
Tachion   Closed 2001

Of the 22 companies listed:

  • 18% are still going.
  • 41% were aquired (I assume under distressedconditions).
  • 41% shut their doors.

This shows that the early years of the century must have been pretty traumatic for the founders and employees of 80% of the start-ups noted here. I doubt that the attrition rates is much lower in other segments either. I was told many years ago that 9 out of 10 start-ups fail and it looks like this is true for this sector anyway!

I guess this sector is pretty much dominated by the big boys these days as much of the specialist service capabilities – security, IP-VPNs etc – slowly became bundled into stock routers.

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