After promoting his first firm to Cisco for $475 million at 26 years previous, this Israeli founder raised $117 million in a spherical together with a who's who of US angel traders to tackle Cisco (CSCO)

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Ido Susan

  • An Israeli startup named DriveNets is decided to upend the multi-billion community tools business dominated by Cisco.
  • It’s led by a networking wunderkind who offered his first startup, at age 26, to Cisco for $475 million, and by a former AT&T exec who offered his final startup to AT&T for $121 million.
  • Now, a large slew of big-name angel traders have poured $117 million into the corporate’s first main funding spherical, together with Microsoft chairman John Thompson.
  • DriveNets is doing issues backwards by specializing in the software program and giving freely its designs free of charge below the Fb-led Open Compute Mission.

Ido Susan, CEO of a scorching Israeli startup referred to as DriveNets, is a pressure to be reckoned with on this planet of pc networking.

He is well-known in Israel’s tight-knit startup group for promoting his first startup, Intucell, to Cisco for $475 million in 2013. On the time, he was simply 26 years previous, and Intucell itself had solely been round for 4 years. 

And now he is again in a a lot greater manner with DriveNets, a scorching Israeli startup that has burst out of stealth by elevating $117 million for its Collection A funding spherical. Buyers within the spherical embody conventional VC corporations — but additionally a formidable checklist of angel traders, who’ve already valued the corporate at $500 million. These angels embody Steve Luczo, former CEO and present chairman of Seagate (who’s becoming a member of DriveNets’ board), former CEO of Palo Alto Networks Mark McLaughlin, and John Thompson, chairman at Microsoft and former CEO of Symantec.

DriveNets intends to set the networking pc business on its ear, altering the enterprise mannequin in a lot the identical manner cloud computing modified the enterprise mannequin of shopping for software program.

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“In thirty years, nothing has modified in networking business” on the subject of their enterprise mannequin, Susan explains. Networking firms like Cisco, Juniper, Arista construct and promote costly, excessive efficiency, specialised merchandise like routers and switches, that usually depend on extremely custom-made pc chips. Additionally they promote specialised software program to run these items of community tools.

That implies that as a community operator or enterprise grows, it has to purchase extra switches and software program, growing their prices.

In distinction, DriveNets is giving freely the specs to its , which was constructed utilizing commodity pc servers and chips.

These designs may be manufactured by any purveyor of low-cost pc tools, referred to as the white-box business. They’ve shared all of this growth with the open supply group based by Fb referred to as Open Compute Mission, which has created a vibrant group with an virtually non secular devotion, particularly within the networking business. 

Most significantly, DriveNets is promoting its software program for a flat price, quite than charging primarily based on utilization. That implies that a buyer’s DriveNets-related prices will keep low, irrespective of how massive their community will get.

DriveNets will not be the one firm trying to push networks onto commodity and put all of the particular sauce within the software program. There’s an entire business that is referred to as community companies virtualization (amongst different names) engaged on this identical downside. AT&T is working by itself home-grown model of the idea, too, with quite a lot of OCP and white-box initiatives. 

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However, Susan says, the distinction to what different startups are doing is that DriveNets software program can deal with really astounding quantities of knowledge flowing throughout a community: from four terabytes to 768 terabytes/second, Susan says. That is cell community operator scale. As compared, a quick company community at this time is operating tools that may deal with 100 gigabytes/second.

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Thompson explains why he needed in

Susan intends to vary the community business a lot the way in which that cloud computing has altered the software program business ceaselessly. And that is why so many angel traders, together with Thompson, minimize checks to get a chunk of this firm.

John Thompson“Individuals like Marc Andreessen make the declare that software program will change the world and this can be a basic instance of how the evolution of software program platform on white-box ,” Thompson informed Enterprise Insider.

“However Cisco, Arista, Juniper and what have you ever, are actually, actually fantastic companies. However they’re caught of their enterprise mannequin. And their enterprise mannequin is extra about than the software program,” he mentioned.

“So I feel that is the chance for a disruptive change in a really giant phase of the business,” he added.

It additionally helped that his long-time buddy Steve Luczo, who additionally serves on the board at each Microsoft and DriveNets, referred to as him and informed him he ought to get in on this deal. 

The community business wunderkind

At 36 years previous, Susan is your basic tech business story of self-made success.

He grew up on a Kibbutz and did not go to school, studying pc science and community engineering throughout his five-year stint within the Israeli military, the place he labored in one of many nation’s well-known, and ultra-secret, safety and intelligence items.

He launched Intucell, his first startup, after leaving the military. It first launched as a location-based service. The thought was to have the ability to inform when individuals introduced their cell phones to locations just like the mall after which ship them advertisements or provides primarily based on their location.

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It shortly turned clear that “this market was not going to fly,” Susan informed Enterprise Insider. Nobody needed a bunch of spammy messages on their cellphone.”

Hillel KobrinskyHowever the Intucell staff had inadvertently created a way more worthwhile expertise — one which understood, and will measure in actual time, all of the sources getting used on a cell community.

Whereas customers would really feel abused by way of that info, the community operators would discover it a goldmine.

Then Susan and his staff of community engineers got here up with a fair higher concept: they created an algorithm that took all that data and helped the community tune its efficiency, one thing they referred to as the “Self Optimizing Community,” or SON.

That is how Susan met his DriveNets cofounder Hillel Kobrinsky.

Kobrinsky had based and offered his startup, an early net conferencing firm referred to as Interwise, to AT&T again in 2007 for $121 million. He had been working at AT&T constructing its Israeli R&D heart.

Kobrinsky examined the Intucell tech in Israel and found it was decreasing energy calls for, bettering spectrum utilization, and saving cash for AT&T’s community there. He introduced in Jon Donovan, CEO of AT&T Communications to satisfy Susan and see it for himself.

Donovan could not imagine the take a look at outcomes: “How will you do that? It does not make sense,” he requested, Susan recollects.

And Donovan was so suspicious that earlier than agreeing to purchase the tech, he had his individuals make some background calls on Susan to seek out out if he was legit. Susan nonetheless laughs about it at this time.

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AT&T did signal on, as did different community operators, and shortly Cisco got here calling with a proposal.

Israeli VC Bessemer Ventures made a killing on that deal, by accomplice Bob Goodman. For his half, Goodman had based and offered two of his personal telecom firms earlier than changing into a VC, and led Bessemer’s $6 million funding into Intucell, which raised $Eight.5 million whole. Finally, Bessemer obtained “48x their funding in 4 years,” Susan says.

When Susan and Kobrinsky teamed up and got here calling for funding of their second firm, Bessemer was in, once more by way of accomplice Goodman.

One other Israeli VC, Pitango Ventures, additionally invested, as did C4 Ventures, the fund created and led by Pascal Cagni. The spherical additionally included participation from  former GM and VP for Apple EMEIA from 2000 to 2012; Doug Gilstrap, finest referred to as a former exec for Ericsson; and Benny Schnaider, considered one of Israel’s super-angels who had six profitable startup exits thus far together with promoting two to Cisco.

Already bringing in hundreds of thousands

DriveNets employees

Though DriveNets has simply come out of stealth to announce its funding and speak about its tech, it is not precisely an untested startup.

Susan says that it already has over 200 workers, between Israel and New Jersey, and is on observe to “generate tens of hundreds of thousands of in income yearly” having booked contracts with T1 service supplier and content material suppliers, though he would not title any of them but. He does say massive announcement with a serious firm is within the works.

And, as a result of he and his enterprise accomplice are each financially impartial from their earlier startups, they don’t seem to be in any hurry to promote this time, he says. 

“The second time [of doing a startup, individuals assume its less difficult. However it’s extra powerful. Individuals anticipate extra from you, and also you anticipate from you. However I am pushed by challenges and my problem is to construct an organization and alter a giant business.”

SEE ALSO: AT&T signed an ‘Eight-digit’ deal that is not excellent news for VMware, Cisco, or Huawei — however could possibly be nice for Google Cloud

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