Editor’s note: Local Tech Wire conducted Q&As with many of the emerging and early-stage North Carolina companies presented at CED’s Venture 2002 conference on April 30-May 1. Companies were asked why investors should be interested in them and what they would do with the money if investments are made. Almost since that creative bit of magic called Internet Protocol was invented, thus creating the ability to carry data and voice in digital packets across virtually all networks and operating systems, telecommunications and network managers have pursued deployment of one-network-for-all transport.
They envisioned cost savings, greater utility, and simplification of operations.
Unfortunately, carrying voice over IP networks (called VoIP) has lagged in quality and performance. It’s not “carrier class”. Companies such as Nortel and Cisco are vigorously pursing VOIP technology that will meet the stringent criteria for clarity, speed and reliability so long associated with voice. And telecom companies also want to generate revenues for all kinds of services as demand for traditional voice and the prices for those services drop. These “intelligent networks” offer a wide variety of services plus tracking and billing options.
Playing in that IP network space and getting a great deal of attention these days is Overture Networks.
The two-year-old RTP startup is focused on enabling telecom companies to “deliver all of their services over Metro IP networks,” says Jeff Reedy, Overture’s president and chief executive officer.
In a Q&A with Local Tech Wire in advance of Venture 2002 where Overture will be making a pitch for $12 million, Reedy points out Overture has five “provisional patents” on technology that it believes can transform networks.
“IP is the clear protocol choice for the future,” he says, “but carriers must build a network that can generate revenues from both high-speed packet services as well as traditional voice and data services. They also want to maximize their current infrastructure while transitioning toward a data-optimized network that can keep up with the escalating bandwidth needs of their customers.”
The cornerstone of Overture Networks is its so-called “circuit-over-IP” technology that the company says can deliver carrier quality. Its Multi-Service IP Gateway, says Reedy, “enables telecom carriers to deliver all their services”.
A wide variety of carriers — major and small as well as new IP-focused companies — are interested in what Overture offers, Reedy says. The company anticipates generating $2 million before the year is out as their equipment reaches the market. And Reedy says forecasts for the market they intend to attack will be north of $1 billion in three years.
Q&A WITH OVERTURE NETWORKS
Answers provided by Jeff Reedy, president and CEO
Times are tough. If you had only one chance and one paragraph to convince an investor, how would you answer this question: “Why should an investor choose your company?”
Investors want to back companies that have demonstrated that they solve significant problems for their customers today, and are positioned to maintain their leadership as their market expands. Overture Networks has the customer traction, the technology and the core team that fits that profile.
What makes your company unique? Do you have a proprietary and/or a patented technology? Please explain why it is unique and what the status is of any patent filings.
Overture Networks’ Multi-Service IP Gateway enables telecom carriers to deliver all of their services over Metro IP networks, both today and as the network evolves. IP is the clear protocol choice for the future, but carriers must build a network that can generate revenues from both high-speed packet services as well as traditional voice and data services. They also want to maximize their current infrastructure while transitioning towards a data-optimized network that can keep up with the escalating bandwidth needs of their customers.
Our patent-pending “Circuit over IP” technology provides reliable “Carrier-Quality” transport of circuits over IP without compromise. The technology is a combination of proprietary hardware and software design. We have filed 5 provisional patents in this area.
What makes your product(s) and/or services unique vs. your competition? Who is your competition, and what do they offer?
Overture’s sustainable differentiation stems from superior technology and product architecture designed specifically for the multi-service metro market. Overture’s team has gained this advantage as a result of many, many years of experience designing both traditional circuit and new packet based systems. It takes a unique combination of skills to get things right.
Overture’s Multi-Service IP Gateway is a new type of product. Other product platforms such as routers, switches and multiplexers lack all of the key functional elements required to serve the market. Some startups are developing non-IP platforms to deliver multi-services, but our approach uses advanced techniques to reliably transport different traffic types over standard protocols and interfaces, making our solution much more usable and attractive to the carrier.
Does your company already generate revenue? If so, how much? Are you cash flow positive?
The product is currently in lab tests at several major telecommunication carriers with revenue expected to begin ramping in 3Q02.
What is your target market?
Telecom carriers are responding to the demand for more bandwidth and more services by building out metropolitan area networks. These networks connect medium and large enterprises or multi-tenant buildings to the carriers’ central offices. This set of carriers include Incumbent Local Exchange Carriers (ILECs), Inter-Exchange Carriers (IXCs), Competitive Local Exchange Carriers (CLECs), new IP-Centric Carriers, international carriers (PTTs) and large enterprises building their own private networks.
What is the size of that market in terms of dollars?
The market for intelligent metro networking products was $1.6 billion in 2001 and is forecast to grow to $4.6 billion by 2005 (Infonetics Research, 2002). The Multi-Service IP metro market will be carved from this overall market, which we estimate to be over $1 billion by 2005.
What share of that market do you believe you can win?
We are positioned to capture at least a 20 percent market share of this expanding market.
What will you do with the invested funds?
Overture Networks is currently seeking $12 million in Series B financing and expects to close in 2Q02. The Series B funds will be used to build on the success of the initial customer lab trial testing to bring the product to market and ramp production. We will build an initial sales, operations support and customer service team. We will expand the marketing and engineering team and continue to enhance the product family.
What is the timeline for product delivery?
The product is currently in lab tests at several major telecommunication carriers with revenue expected to begin ramping in 3Q02.
What do you want from an investor other than money?
Experience in thinking through strategic issues.
A track record of adding value as the company progresses through different stages of growth.
Why will investors be impressed with your management team?
The team has strong skills in marketing and engineering, with a track record of building companies that develop and sell innovative and successful networking products to the telecommunications carrier market.
Highlights of the team’s collective careers from a management perspective include:
- Founding a successful startup (T3 Technologies)
- Growing profitable businesses
- Part of executive team taking a company public
- Developing business relationships with major partners
- Direct involvement in acquisition process as both seller and buyer
What is the exit strategy for the investor from your company?
As we continue to grow and add value to the company, various exit opportunities will present themselves. Our focus on strategic alliances will naturally lead to acquisition offers, and an IPO may be possible in the 2004-2005 timeframe.
Are there potential strategic alliances with larger companies?
We are having substantial discussions with targeted partners in several categories that would result in relationships based on co-marketing, OEM, and licensing our technology.
Companies with complementary products in core and metropolitan networking.
Companies with strong traditional product lines looking to transition to new packet based solutions.
Companies with strong international presence.
Do you wish to take the company public? Or do you wish to grow the company and either sell it or acquire other companies?
We want to grow the company and become a dominant player in the multi-service metro market. Long term, that may be as a stand-alone company or as part of a larger entity.
What do you want to see in a term sheet? What would you consider “fair”?
That answer totally depends on the value the investor brings to the business.
How do you really feel about venture capitalists and bankers?
Investors are an essential part of growing a large business.
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OVERTURE NETWORKS FACT BOX:
TYPE OF COMPANY: Manufacturer of Telecommunication Carrier-Class Networking Equipment
ADDRESS: 2 Davis Drive Research Triangle Park, NC 27709
PHONE NUMBER: (919) 558-2200
WEB SITE: www.overturenetworks.com
MANAGEMENT TEAM MEMBERS:
Jeff Reedy — President & CEO
Prayson Pate — Vice President of Engineering
Dale Graver — Vice President Marketing & Business Development
BOARD MEMBERS:
Bernard Gray
Joe Velk
W. Bart Bielawski
Alan Mann
Jeff Reedy
Prayson Pate
INVESTORS:
Gray Ventures
Live Oak Seed Equity
NC Technological Development Authority
Charlotte Angel Partners
The Atlantis Group
Tri-State Investment Group IV
truePilot
NorthCreek Capital
Several individual industry veterans
COMPANY MISSION STATEMENT: Overture Networks supplies carrier-class multi-service networking equipment enabling telecommunication carriers to deliver all of their services over Metro Optical IP networks, both today and as the network evolves. Overture Networks’ solutions allow carriers to invest in their networks to maximize revenues, lower costs and meet the changing needs of their customers.
REVENUES: The product is currently in lab tests at several major carriers with revenue expected in 3Q02.
YEAR ESTABLISHED: 2000
NUMBER OF EMPLOYEES: 12 expanding to over 40 by end of 2002
Friday’s profile: Gentris
