Network Photonics: Faster, Better and Cheaper –

BOULDER, Colo. – If you live in or near a major metropolitan area, you are probably used to dealing with traffic. But delays on Interstate 880 have nothing on Internet traffic. The Internet has caused an enormous explosion in data traffic, which has necessitated an upgrade in the existing telecom infrastructures.

That upgrade, which requires moving infrastructure from copper wire to optical fiber, is underway. The existing systems require those optical pulses traveling through the fiber to be converted to electrical signals when they reach the metro areas, which may sound simple enough, except for the fact that the process is extremely expensive and slows down the performance of the fiber optic networks.

Network Photonics has a solution: CrossWave, its proprietary dense wavelength division multiplexing (DWDM) switching technology. The company’s third-generation, all-optical networking systems will enable the delivery of managed wavelength services into metro areas, and alleviate the growing gap between gigabit end-user networks and terabit fiber optic backbones. Network Photonics’ CrossWave technology will also eliminate the need for optical-to-electronic-to-optical conversions, thereby increasing performance and decreasing costs.

“Network Photonics has a core technology. We’re developing a third generation of DWDM systems and the third generation is going to feature all-optical wavelength switching and routing for the first time in the metro area,” says Steve Georgis, the company’s president and chief executive. “The systems will now be much more flexible and capable to dynamically deliver services wherever they need to go and respond to the emerging trend in the metro areas for different types of protocols, and for dynamic configuration. No else seems to know how to do that.”

The company has had a quick and furious trip through the venture world. Founded in July 1999, Network Photonics received its initial funding in July 1999 from New Enterprise Associates (NEA) and U.S. Venture Partners, which teamed up to provide a first round investment of $10 million.

In late October, The Sturm Group, a Denver-based private equity firm, led the company’s $106.5 million second round. Strum was joined by Spectrum Equity Investors and Mustang Ventures as well as repeat investors, NEA and U.S. Venture Partners.

Georgis says the latest round of funding will be used primarily for operating.

“We’re still in the product development stage, we’re still continuing to grow our staff aggressively – we expect to more than double it over the course of next year – and we’re expanding and investing in our facilities. Optical networking is a very expensive and capital intensive business to be in.”

The company now has 90 employees with about 75 of them in its Boulder headquarters and the remainder in its Santa Rosa, Calif. facilities, which were opened in July.

Georgis says the company’s approach to financial backing is to work with the absolute stellar firms in the VC community and partner with those that can really add a lot of value to Network Photonics.

In the company’s latest round of funding, it was actually the VCs that contacted Network Photonics. “In general, the latest investors actually researched and contacted us,” Georgis says. “Once the buzz got out in the VC community that we were embarking on a second funding round, the phone started ringing off the hook.”

Many of the calls the company received were from very small firms that did not really fit the profile of who Network Photonics was willing to partner with. “We were getting so many calls, we never really had the opportunity to be that proactive ourselves. We created a short list of firms we wanted to contact, and ultimately they called us,” says Georgis.

“Network Photonics has created a technology that will solve the problems currently plaguing the metro space at a price that has never before been achievable. The approach is truly innovative,” said Greg William, a principle with The Sturm Group, in a statement.

Prior to founding Network Photonics, Georgis was a co-founder of Exabyte Corp., a network storage and storage-area networking company. He founded Network Photonics with Ted Weverka, chief technology officer, and Richard Roth, vice president of business development. The executive team also includes Dave Arnold, vice president of system engineering and operations, Andrew Goldstein, vice president of subsystem engineering and manufacturing, and Merle McCreery, chief financial officer.

Since the company is still “pre-Alpha” in terms of product development, it has not been out selling to customers; however Georgis says the company is engaging with customers and starting to forge partnerships. Network Photonics’ target customer base will include carriers and service providers that are building metropolitan area networks – those targeting the next level of gigabyte level services; the ASP and ISP communities; and some of the tier-one competitive local exchange carriers (CLECS).

As for the future, Georgis says the company is not planning for a third round of funding. He says the second round should provide enough money to allow Network Photonics to get its product to market and to begin generating revenue. “We’re a company that really tries to operate on business fundamentals, our intention is not to IPO as quickly as possible, our intention is to build a very strong business and to use an IPO when the time is right, primarily to gain additional capital.”