Saturday, September 01, 2001
PixStream veterans back in the game
New high-tech firm opens its doors
Ron DeRuyter , RECORD STAFF
WATERLOO -- Fuelled by the spirit of PixStream, Waterloo's newest high-tech firm is taking off like a rocket.
Sandvine Incorporated opened for business yesterday with 40 employees -- virtually all of them from PixStream -- and a whopping $19.5 million in start-up financing.
"We hit the ground running," says Dave Caputo, the firm's president and chief executive officer.
Sandvine isn't the rebirth of PixStream, but Cisco System's decision to close PixStream in April, just four months after it paid $554 million for the video networking business, provided the launching pad.
"We think we had a great team," says Caputo. "We wanted to keep it together and get something started that would be an exciting new thing to do."
The new venture certainly erases any remaining bitterness over what happened to PixStream.
"Of course, everyone was disappointed when Cisco shut us down," says Caputo.
"But that disappointment is dwarfed by the excitement of getting Sandvine started."
The entire high-tech community is buzzing over Sandvine.
"When you get the kind of financing these guys lined up and have the opportunity they have, it's not a small shop quietly working on a few prospects," says Greg Barratt, president of the Communitech technology association.
"It is a rocket taking off."
Sandvine, which hopes to employ 135 people within two years and eventually do a public share offering, is tight-lipped about its products because it doesn't want to tip off the competition.
Like PixStream, it will develop equipment that enables telecommunications firms to transmit video signals over broadband networks.
However, Sandvine's founders -- Caputo, Don Bowman, Tom Donnelly, and PixStream founders Brad Siim and Marc Morin -- are careful to put some distance between the two businesses.
"People have asked: 'Is it PixStream II?' " says Siim. "No, it's not. It is a new company with a new vision."
Caputo, formerly PixStream's vice-president of marketing, says the biggest challenge Sandvine faces "is going to be not continually comparing ourselves to our past.
"The idea here is to re-invent ourselves into yet another great company."
Sandvine, launched five years after PixStream started and two years after PixStream spun out Kaparel Corporation, has been in the works for months.
It was kept under wraps until yesterday because most of the employees were on Cisco's payroll until Thursday, part of the 40-member team that wound down PixStream and provided support to its customers.
(The other 170 employees were laid off the same day Cisco announced the closing; five are working for another new PixStream spin-off -- VideoLocus -- and the rest were snapped up by other local tech firms.)
Sandvine is starting in the middle of a high-tech recession, but Caputo says the timing couldn't be better.
While most large networking equipment companies are focused on short-term concerns such as reducing costs and keeping shareholders happy, Sandvine can take a longer view, he says.
"We are completely in an investment mode," says Caputo. "We don't have to worry about the next quarter. We can plan 12 to 18 months out."
By that time, the slump will be over, and telecommunications firms will be ready to buy the next generation of networking equipment, he says.
Sandvine, which took over Cisco's lease on Columbia Street and also bought its furniture and equipment, has enough funding for two years.
The money comes from four venture capital companies -- Celtic House International, Vengrowth Capital, the Business Development Bank of Canada and Tech Capital Partners.
Celtic, Vengrowth and the bank had money in PixStream -- and were rewarded handsomely when Cisco bought the business -- so it wasn't a tough sell to involve them again.
Putting money into Sandvine is "as close as you can come to a no-brainer," says Mike Cohen, managing director of Toronto-based Vengrowth.
PixStream's managers had a standing offer of money from Celtic, the largest investor in Sandvine.
"The venture capital business is about finding people that are ambitious, capable and have a good track record, and these guys have all that," says Andrew Waitman, managing general partner of the Ottawa firm.
Waterloo-based Tech Capital Partners is a new investor, but knows Sandvine well because managing partner, Tim Jackson used to be PixStream's chief financial officer.
Jackson says Sandvine signals a maturing of the local high-tech sector.
"This is the sort of thing that is going to take the region to the next level," he says. "It is the second- and third-generation companies that will get us to the level the Ottawa area is at."