August 2005

Dealflow: Funding of Innovative Startups

Caspian Networks and Quorum Systems

By Andrew P. Madden

Company Spotlight

Caspian Networks
When it comes to corporate pedigree, you can't get much better than Caspian Networks. The company was started in 1999 by Lawrence Roberts, one of the founding fathers of the Internet. In the mid-1960s, Roberts was chief scientist for the U.S. Department of Defense's Advanced Research Projects Agency, whose computer packet network ARPAnet evolved into the modern Internet. Roberts later founded Telenet, the first packet data communications carrier.

Now Roberts is hoping to transform today's Internet. In its latest announcement, Caspian says it has gained another $55 million in funding from its existing investors. Caspian is touting routing technology that lets communications service providers efficiently manage Internet protocol (IP) traffic across their networks. This type of control and optimization is increasingly important to service providers as IP-based traffic, which now includes video, gaming, music downloads, HDTV, and voice over IP (VoIP), gets heavier.

Caspian recently announced an agreement with ETRI, a research center supported by the South Korean government, to develop a network reaching 20 million broadband users in that country, and the company also signed a codevelopment pact with Northrop Grumman, the aerospace and defense systems company, to work on a project for the U.S. Air Force.

Quorum Systems
Wi-Fi is quickly becoming pervasive, and yet there is a gap between wireless data networks like the one you connect to at Starbucks and the wireless cellular networks that connect our mobile phones. Enter San Diego-based semiconductor company Quorum Systems, which is marketing a chip that will unify these networks, allowing both the Wi-Fi and cellular functions to operate in the same handset.

While a number of other chip makers are working to make dual-mode chips, Quorum claims an advantage in its low-cost design; the company argues that dual-use handsets will not take off unless they are attractively priced. As for the pitch to network operators, it's simple: your customers will be happier because they're getting better, more reliable coverage and the advantages of both Wi-Fi -- including VoIP -- and cellular service.

Some market researchers believe sales of dual-mode phones could reach 100 million units by the end of this decade. The challenges for Quorum will be to help the market mature and to make certain that its chip resides in some significant portion of those phones.