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!
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.