| Light From the
Ashes
by Randy
Barrett
Virginia Business
June 2004
If
at first you don’t succeed — try at least
one more time and hope your luck improves.
The credo may seem like lunacy in the present state
of telecom industry decline, but it works for John Taylor,
chairman of Lambda Optical Systems Inc. in Reston. The
optical networking switch maker started life in 2000
as FirstWave Secure Optical Networking. The Internet
bubble was at maximum inflation and prospects seemed
limitless for the company’s better mousetrap:
an all-optical switch that could move bits faster and
more cheaply.
But things unraveled quickly when the tech economy nose-dived
in 2001 and Primary investor Raza Venture Fund of San
Jose, Calif., lost enthusiasm for the startup. U.S.
telecom carriers were hemorrhaging red ink at an alarming
rate and there appeared to be no market for a new optical
switch. “They made a broad level decision in 2002
that they would exit the [telecommunications] systems
business,” says Taylor. “FirstWave was a
casualty and there was no fault of our own.”
Maybe not, but the situation was a first-class mess.
With its venture financing gone, vendors and employees
went unpaid and Taylor resigned as CEO of the company
in October of 2002. But Taylor and a few other intrepid
investors still believed in the potential of FirstWave’s
unique system. Palo Alto, Calif.-based Sevin Rosen Funds
and ComVentures provided $10 million in first-round
financing and Taylor purchased the technology in March
2003 and reincorporated under the name Lambda Optical
Systems.
“All of the $10 million went straight out the
door,” says Taylor — much of it to pay off
the debts of the former company.
As part of the deal, a $29 million, five-year development
contract with the Naval Research Laboratory in Washington,
D.C., was also transferred to Lambda. The NRL had been
using the all-optical switches in its Advanced Technology
Demonstration Network. The network carries ultra-high
bandwidth communications, including high-definition
TV at 1.6 billion bits per second, between federal agencies
and the intelligence community.
According to Taylor, Lambda’s switching technology
beats current systems because it uses tiny silicon mirrors
to segment and redirect signals without changing them
into electrical impulses, which require large and expensive
connection gear.The new approach could save carriers
up to 80 percent on their current capital cost, he says.
Lambda is targeting its $100,000 switch to busy carriers
in Korea, Japan and Europe – not the moribund
U.S. market. The company announced a $14 million second
round of financing in April. There don’t appear
to be too many competitors in sight. All of the major
telecom manufacturers have slashed their optical-switch
research and development budgets in the face of the
sagging U.S. telecom market.
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