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In the Spotlight: Laurel Networks Start-up Laurel seeks to be Pittsburgh's Cisco Sunday, June 03, 2001 By Stephanie Franken, Post-Gazette Staff Writer
When the Internet was born, telecommunications companies launched a frenzied race to build the infrastructure that would support it.
In the 1990s, the telecoms scrambled to lay the networks that would carry data across the new "information superhighway." They spent billions of dollars building enough capacity -- or bandwidth, as techies call it -- to zip high-speed data across the nation and around the world.
By 2001, the task was accomplished -- more or less. Layer upon layer of networking equipment had been slapped down by companies that began offering high-speed Internet service to their customers.
But as the founders of Robinson-based Laurel Networks point out, the telecoms now had a problem.
It was a rather big problem. "Now, they have a lot of bandwidth," said Atul Bansal, president and chief executive officer of the start-up. "But they are trying to find out how they can generate more revenue. People are very worried about the profitability of large telecoms."
That's because existing networking systems are so complex that they make it exceedingly difficult for telecoms to charge rates that accurately reflect the cost of services they offer. In general, Bansal said, it's very hard for Internet service providers to make money off of their new networks, after they have spent huge sums to build them.
Laurel Networks hopes to be the company that rescues the telecoms from their tangled networks and low profits. The start-up -- founded in October 1999 by Bansal, a former president of Fore Systems' Network Control Technology division, and several former Fore employees -- rolls out its flagship technology this week.
Laurel is not alone, however, in its mission to help telecom giants make more money. It aims to compete against two behemoths, Cisco Systems and Juniper, which have similar goals. These companies have built "edge routers" that make telecommunications networks more efficient and, potentially, more profitable. Edge routers essentially streamline networking systems and eliminate data bottlenecks. They also help telecoms offer higher-quality service to customers -- and charge them accordingly.
Little Laurel, which has 125 employees, is bellying up to the industry's biggest players by building its own edge router. It aims to become Pittsburgh's own Cisco or Juniper with its "next generation" service edge router, ST200. This technology uses IP (Internet protocol) technology to further improve network performance, decrease costs, and help telecoms more accurately bill customers.
It's an ambitious goal, but Laurel says it's ready for the fight. It publicly launches ST200 on Tuesday at one of the telecom industry's largest trade shows, Supercomm 2001 in Atlanta, Ga.
ST200 works by reducing the number of layers in an optical network -- which transmits data as tiny pulses of light -- to decrease both the network's complexity and its operating costs. It also functions as a sort of high-tech traffic director, eliminating some of the bottlenecks within a network that can slow or stop the flow of data.
Some potential customers are beginning lab trials that could lead to contracts, said Bansal. "The reception from the industry has been very positive."
Because it has signed confidentiality agreements with all of its prospective clients, Laurel cannot name them and can say only that it's courting a number of national service providers. "They're large companies that generate billions of dollars in revenue," said Stephen Vogelsang, vice president of sales and marketing.
By the end of the year, Laurel hopes to start closing deals. If the deals come in, they probably will be multiyear, multimillion-dollar contracts, Vogelsang said.
In the meantime, Laurel is subsisting on a supply of second-round venture funding -- $60 million -- from investors such as New Enterprise Associates, Trinity Ventures, Worldview Technology Partners and the WorldCom Venture Fund. It has received a total of $77.3 million in venture funding since it was founded. It also received $871,000 through the state's Opportunity Grant Program to move into its new headquarters at Omega Corporate Center and build its staff to an expected 170.
Venture capitalists' faith in the start-up stems largely from the backgrounds of its founders. In addition to Vogelsang and Bansal, Laurel was founded by another former Fore employee, Robert Warden, who now serves as Laurel's vice president of engineering. He brought several Fore engineers with him to Laurel to establish a "second generation" start-up, which builds from the strength of the first-generation company.
Purchased by London-based Marconi PLC in April 1999 for 4.5 billion, the former Fore Systems was one of Pittsburgh's first high-profile, high-tech companies. It developed high-speed networking systems, like Laurel. Now Marconi Networks, the Pittsburgh division of the multinational Marconi PLC employs roughly 1,200 in the region.
"We had a track record of success," Warden said of the founders' days at Fore.
They also found they had good connections to potential telecom customers through their association with Fore. And Warden said frequent conversations with telecom representatives made it clear what the industry wants -- as well as what it doesn't want.
"They don't want just a piece of the puzzle; they want the whole thing," Warden said. "We learned: Show them how they can accurately bill their customers and make more money. Make their jobs easier."
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