Here comes another of the Chromatis clones that have sprouted in Israel like mushrooms after the first rain. The Israeli market did the math and figured: 1. This is a time of huge investment in communications infrastructure; 2. Israel possesses the rare in-depth know-how and technological human capital developed on the Army production line, and 3. The world knows it. That adds up to communications companies with excellent potential-plus, born with a silver spoon in their mouths.
Atrica is one of these companies. Not only does it have a cooperation agreement with a leading strategic partner, the strategic partner is the leaders’ forefather. 3Com supplied Atrica with $4 million. Eric Benhamou himself sits on the board of directors offering experienced personnel and moral support. 3Com did all of this without strangling the young company in an imperialist bear hug – after Atrica’s first financial round in which it raised $16 million, 3Com was left with less than a 20% holding in the company.
Atrica is not the only company to be so honored. 3Com has a program called “directed start-up” designed to exploit technologies developed within the company but which do not fit its basic strategy for expansion, so it lets them spread their wings and fly out from the nest into world markets. Atrica’s three founders came from 3Com. CEO Avinoam Rubenstein was a founder of NiceCom, which was acquired by 3Com in 1994 for a legendary $160 million. Later, Rubenstein served as 3Com Israel general manager until February 2000, when he left to found Atrica.
Vice president R&D Zvika Bronstein and Director of Systems Architecture Amir Lahat complete the founding triumvirate. They were joined by people from 3Com and Nortel. Its staff now numbers 70 people, including 30 it headhunted mainly from 3Com Israel.
What is Atrica’s message? The company is bringing to the metro market (where Chromatis made its name) the message of the ethernet technology, using a technology launched years ago – Sonnet. The metro market runs on optical networks at the speed of light, but it faces problems at the user contact or the “access”. Instead of offering additional options to the end-user, existing technology is rather like a traffic cop who is trying to direct the flow of traffic but only succeeds in jamming it even more. This SNAFU is termed the “metro gap” – the gap between the fiber optic superhighway and the gridlocked intersections on that last stretch before the wonders of high-speed networking reaches the customer.
The metro’s vehicles – the ones stuck in the traffic jam – are the range of services, including flexible bandwidth that would permit an organization to consumer transmission services at a predetermined level. For example, if a company suddenly wants to hold a video conference over current infrastructure, it must prearrange with the network “police” a long time in advance to ensure the necessary bandwidth will be available. This also costs money, because the bandwidth resource has to be designated solely for this purpose. Many companies are now playing in this arena, including Fujitsu, Lucent and Nortel.
The problem isn’t a lack of fiber optic cables, especially in the US. While Israel talks about the optical revolution, the US is working on it, says Rubenstein. Almost every hotel he stays in (like so many of his counterparts, Rubenstein travels frequently to the US) overlooks a trench being dug to lay fiber optic cables. Scores of US cities are already crisscrossed by fiber optics, whose purpose is to improve the inland transmission of information. The trade and sale of licenses for laying fiber optic cable carries some quite exotic tales reminiscent of the old economy: the laying of the transcontinental railroads, the transoceanic cables, oil and gas pipelines, and even the river levee projects. Did you know that in Europe, franchises are being leased for the right to lay fiber optic cables along the riverbanks?
Rubenstein is making hay from this boom. The greater the investment in infrastructure, the more forecasts for use of the technology soar, the greater is the need for Atrica’s technology. What will be done with all this infrastructure if tired traffic cops at the intersections block access to the superhighway? Atrica is working on the alternative: a kind of traffic light – to continue the analogy – that will direct bandwidth to the customers according to need, thereby optimizing the existing infrastructure. The company calls this “Optical Ethernet”, which sounds like an oxymoron to industry people: taking the eulogized ethernet technology and applying it to the adulated fiber optic technology (at least until the Nortel mess of last week).
These are Atrica's potential customers: Service providers of various stripes who are the fiber optic midwives; the local telcos such as France Telecom (which has invested in Atrica), who were the colonial lords of transmission infrastructure, but who are now facing deregulation and competition and therefore have to become competitive; the Building Local Exchange Carriers (BLECs), which provide communications services to organizations in buildings; the Competitive Local Exchange Carriers (CLECs), which provide new services to the urban sector; and the Inter-Exchange Carriers (IXCs), which provide inter-urban communications services.
To date, although Atrica has won the trust of some amazing groups: Benchmark Capital, the main investor in eBay; AOL; US funds Handspring, Palm and Juniper, which Forbes considers to be the number two fund in the US; Accel Partners; 3Com; Avici; the Israeli fund CyOptics, which is ranked ninth in the US; and France Telecom’s venture capital arm, Innovacom Venture Capital.
Atrica already has six beta agreements and field tests which will begin at the end of the year. The company plans to declare its product in Q1 2001. Atrica’s competitors are not only the large and awkward giants, they are also other start-ups, which like Rubenstein, are trying to improve present solutions, such as Zaffire.
Founded: February 2000
Product: Optical ethernet equipment for the urban communications network market
Contact Person: Einat Milstein, Marketing Communications
Market: Service providers (veteran and next generation)
Competitors: Fujitsu Lucent, Nortel.
Ownership: Entrepreneurs and employees (50%), investors (50%).
Published by Israel's Business Arena on 6 November 2000