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The Rebirth Of Photuris
“…For a while I truly
thought that we had
planted a Chinese bamboo
tree (no growth for four
years, then a tiny shoot
appears, and in the fifth
year it grows eighty
feet). Unfortunately for
us, we didn't get a fifth
year…”
This is a memo that Ashish Vengsarkar, founder of Photuris sent out to his staff on March 30, 2004 announcing the closure of the company. Like any other entrepreneur, Vengsarkar too was pained by the fact that he had to let go his 150 employees. However, in the true spirit of entrepreneurship, Vengsarkar did not give up. He firmly believed that he would find a buyer who will take on not just his company’s innovative metro network products but also some of the people who developed it.
Once the wind-down became a certainty, Vengsarkar and his core team were busy taking the company through the liquidation process. They did not file for bankruptcy. New Jersey’s state code allowed Vengsarkar to try out an alternative to a formal bankruptcy proceeding. Assignments for the Benefit of Creditors (ABC's) process allowed Photuris to clean up its balance sheet at a significantly lower expense outside the judiciary system.
The ABC process had cleared the way for Photuris to be acquired by another company. The management of Photuris opted that a startup should acquire the company. “If a large company acquires, the probability that your vision gets diluted is more. We knew that we can take our product to market if a startup buys us out,” notes Vengsarkar. And it happened just that way. In June this year, Mahi Networks announced the acquisition of Photuris. Photuris’ product is alive and its employees are back at work at Mahi.
“Even at the time of dying, an entrepreneur can think creatively and make sure that his vision is alive. As we did, I encourage startups to gang up together and build an emerging supplier.”
What went wrong with Photuris?
It all started in January 2000. A group of engineers set out to develop an integrated optical WDM and TDM system for metro core and regional transport networks. Photuris’ metro DWDM box came with a difference. It doesn't just multiplex low-speed signals onto a wavelength. It has a full-blown Sonet add-/drop mux (ADM) on a card, which makes for very efficient network upgrades. Vengsarkar says the great thing about Photuris' box is (or "was" as he put it) that it eliminates complexity for carriers, by automating the process of recalculating power budgets when networks are reconfigured.
In 2000, all the carriers were eager to jump on the latest of technologies. “If the product could leapfrog any other existing products in the marketplace and had the right price points, carriers were ready to buy from the startup,” recalls Vengsarkar. This was a good indicator for Photuris’ roadmap. In fact, Photuris got close to a number of carriers, took their inputs as it built its product. “Every carrier we talked to expressed interest in buying our product,” says Vengsarkar.
Market Dynamics Change
All that changed when the telecom bubble burst. Many startups started collapsing and the carriers became a lot more vary of picking up equipment from startups.
To Photuris’ bad luck some of the carriers that it was in talks with went out of business. In those that managed to survive, the management changed. People who were aggressive risk takers started moving out of business and slightly more conservative approach started being taken in business. Secondly, technologists who were high influential part of the business became less influential in terms of procurement decisions in the carrier space. All these added up to Photuris’ misfortune.
Lessons Learnt:
Though the market dynamics were quickly changing, Photuris’ metro box was still under development. Even as it worked towards the completion of the product, the company could have built a miniature version of its box and target smaller carriers market where the dollar spent on the product are lesser. “In hindsight, it looks obvious that we could have done it,” agrees Vengsarkar but he quickly adds, “It is not easy to completely change the business model for a company that is building a carrier class optical product at system level.”
The Photuris team didn’t contemplate much on changing its strategy because even in 2002 it had prospective customers who said, ‘continue on the path you are on and we will find you a partner.’ “You are never sure whether you have to abandon the plan that you have in place, especially when customers are saying that they will trial your product and buy it.”
But just when Photuris was ready to trial its product the OEMs created all sorts of complications. The big vendors [equipment manufacturer] insisted Photuris to find a big carrier to partner with.
That wasn’t any easy. Despite carriers showing interest in Photuris’ product there were no corroborating evidence behind those promises. “A few executives from the carriers might have been highly enamoured by the product and showed interest to buy. But as an entrepreneur you should note that they are not the only decision-makers. There are others who entrepreneurs typically don’t get to. You have to get to all people to be sure that assurance is legitimate or valid,” explains Vengsarkar.
Carrier Engagements
“We were in deep negotiation with three carriers till the very end. We were in the process of closing a deal with one of the RBOC, Vengsarkar claims. The company went through total due diligence. The decision to pull the plug on the company was triggered by a "negative decision" by one of the three RBOCs trialing Photuris's equipment, according to Vengsarkar. The deal was killed at the partner’s headquarters by its CFO for completely different reasons. Some of the partners with whom we went close till the end had the not invented here (NIH) attitude. Vengsarkar explains, When they [partner] pull together all the different units within their company, many will question - Why are we acquiring this company when in a year or two we will have a product similar to this? That inertia, inability to take some quick decision is behind most important thing.
Photuris' shutdown was not a rejection of the technology -- it was sound, rather complex -- but more likely a rejection of strategy and execution.
This is a memo that Ashish Vengsarkar, founder of Photuris sent out to his staff on March 30, 2004 announcing the closure of the company. Like any other entrepreneur, Vengsarkar too was pained by the fact that he had to let go his 150 employees. However, in the true spirit of entrepreneurship, Vengsarkar did not give up. He firmly believed that he would find a buyer who will take on not just his company’s innovative metro network products but also some of the people who developed it.
Once the wind-down became a certainty, Vengsarkar and his core team were busy taking the company through the liquidation process. They did not file for bankruptcy. New Jersey’s state code allowed Vengsarkar to try out an alternative to a formal bankruptcy proceeding. Assignments for the Benefit of Creditors (ABC's) process allowed Photuris to clean up its balance sheet at a significantly lower expense outside the judiciary system.
The ABC process had cleared the way for Photuris to be acquired by another company. The management of Photuris opted that a startup should acquire the company. “If a large company acquires, the probability that your vision gets diluted is more. We knew that we can take our product to market if a startup buys us out,” notes Vengsarkar. And it happened just that way. In June this year, Mahi Networks announced the acquisition of Photuris. Photuris’ product is alive and its employees are back at work at Mahi.
“Even at the time of dying, an entrepreneur can think creatively and make sure that his vision is alive. As we did, I encourage startups to gang up together and build an emerging supplier.”
What went wrong with Photuris?
It all started in January 2000. A group of engineers set out to develop an integrated optical WDM and TDM system for metro core and regional transport networks. Photuris’ metro DWDM box came with a difference. It doesn't just multiplex low-speed signals onto a wavelength. It has a full-blown Sonet add-/drop mux (ADM) on a card, which makes for very efficient network upgrades. Vengsarkar says the great thing about Photuris' box is (or "was" as he put it) that it eliminates complexity for carriers, by automating the process of recalculating power budgets when networks are reconfigured.
In 2000, all the carriers were eager to jump on the latest of technologies. “If the product could leapfrog any other existing products in the marketplace and had the right price points, carriers were ready to buy from the startup,” recalls Vengsarkar. This was a good indicator for Photuris’ roadmap. In fact, Photuris got close to a number of carriers, took their inputs as it built its product. “Every carrier we talked to expressed interest in buying our product,” says Vengsarkar.
Market Dynamics Change
All that changed when the telecom bubble burst. Many startups started collapsing and the carriers became a lot more vary of picking up equipment from startups.
To Photuris’ bad luck some of the carriers that it was in talks with went out of business. In those that managed to survive, the management changed. People who were aggressive risk takers started moving out of business and slightly more conservative approach started being taken in business. Secondly, technologists who were high influential part of the business became less influential in terms of procurement decisions in the carrier space. All these added up to Photuris’ misfortune.
Lessons Learnt:
Though the market dynamics were quickly changing, Photuris’ metro box was still under development. Even as it worked towards the completion of the product, the company could have built a miniature version of its box and target smaller carriers market where the dollar spent on the product are lesser. “In hindsight, it looks obvious that we could have done it,” agrees Vengsarkar but he quickly adds, “It is not easy to completely change the business model for a company that is building a carrier class optical product at system level.”
The Photuris team didn’t contemplate much on changing its strategy because even in 2002 it had prospective customers who said, ‘continue on the path you are on and we will find you a partner.’ “You are never sure whether you have to abandon the plan that you have in place, especially when customers are saying that they will trial your product and buy it.”
But just when Photuris was ready to trial its product the OEMs created all sorts of complications. The big vendors [equipment manufacturer] insisted Photuris to find a big carrier to partner with.
That wasn’t any easy. Despite carriers showing interest in Photuris’ product there were no corroborating evidence behind those promises. “A few executives from the carriers might have been highly enamoured by the product and showed interest to buy. But as an entrepreneur you should note that they are not the only decision-makers. There are others who entrepreneurs typically don’t get to. You have to get to all people to be sure that assurance is legitimate or valid,” explains Vengsarkar.
Carrier Engagements
“We were in deep negotiation with three carriers till the very end. We were in the process of closing a deal with one of the RBOC, Vengsarkar claims. The company went through total due diligence. The decision to pull the plug on the company was triggered by a "negative decision" by one of the three RBOCs trialing Photuris's equipment, according to Vengsarkar. The deal was killed at the partner’s headquarters by its CFO for completely different reasons. Some of the partners with whom we went close till the end had the not invented here (NIH) attitude. Vengsarkar explains, When they [partner] pull together all the different units within their company, many will question - Why are we acquiring this company when in a year or two we will have a product similar to this? That inertia, inability to take some quick decision is behind most important thing.
Photuris' shutdown was not a rejection of the technology -- it was sound, rather complex -- but more likely a rejection of strategy and execution.
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