Laurel Networks Grabs $60 Million In Second Round Financing

Edge router maker Laurel Networks feels it gained instant legitimacy after securing $60 million in second-round investments from name-brand providers Monday.

In a market expected to generate $20-$25 billion by 2004, Laurel expects to join the lofty heights of Cisco Systems Inc. and Juniper Networks with its next-generation class of routers that combines IP fingering and bandwidth service allocation.

Laurel President and Chief Executive Officer Atul Bansal said his company was looking specifically at investors who would eventually become its customers when it went looking late last year.

“We went to the tier one players, for example NEA, who are part of Juniper and UUNet,” Bansal said. “We also got the MCI/Worldcom venture arm, which is actually a huge endorsement that this is a huge market and our team can execute. The router market is not easy to enter. There are only two other players, Cisco and Juniper, and having Worldcom (Venture Fund) investing in Laurel gives us an endorsement that we are big, and are the third successful player in this market.”

Bansal said the financing goes right to its infrastructure, with plans to double its current workforce of 104 employees located at its headquarters in Sewickley, PA, and regional offices nationwide. The company is also looking at putting together a customer interface, most likely a Web-based application that lets service providers keep track of the bandwidth used by its customers.

Its a good time for Bansal and his company to make the venture capital circuit, with businesses around the U.S. expected to shell out $110 billion in technology and services by 2004. Edge routers, which connect the backbone to an institution’s local area network (LAN) or wide area network (WAN), are expected to play an important role.

According to Kneko Burney, Cahner’s Instat director of eBusiness infrastructure and services, in her report, “Demand for Internet Infrastructure and the Build-up of Commerce Capabilities in the Middle & Enterprise Markets,” more and more companies will be looking to the Web to enhance its own services.

“U.S. businesses of all sizes began seriously considering the Web to enhance their business models about 18 months ago,” Burney said. “Moving into 2001, the majority of firms are just now likely to realize some of the potential the Internet can offer them.”

Bansal said his company would bring its product public sometime in the middle of this year.

Laurel’s new technology, which Bansal said is the only one of its kind on the market now, is the marriage of the IP router, which handles the destination data travels, and bandwidth management. The new product gives service providers the ability to make money on next-generation business-class services like virtual private networking (VPN) and video conferencing.

“The problem is that people have built these huge Internet backbones, but they don’t know how to make money on the bandwidth and they want to offer new IP services to customers,” Bansal said. “In the past, they’ve been providing frame relay and ATM but they want to migrate their customers to (the more efficient) IP services.

“People are not making money on the Internet, but with this kind of router they can provide destination-aware services,” Bansal said. “For example, if someone wants to talk with someone else on the network with a VPN, we can identify the traffic and actually give the treatment according to the (companies’) business policy. Business service providers can then charge businesses money according to the business services they are providing.”

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