In the News...

Glenn Drexhage

A U.S. company with a sizable local subsidiary has landed a hefty financing round that includes a follow-on investment from a B.C. fund.

Inkra Networks Corp., which is headquartered in Fremont, Calif. and opened a Burnaby subsidiary in November 2000 which employs about 35, recently announced a financing deal worth more than US$30 million.

Vancouver's Greenstone Venture Partners was the sole Canadian venture capital firm that participated in this latest round, which was led by California's Morgenthaler Ventures and took about three months to complete.

Altogether, Inkra has raised nearly US$67 million since its founding in May 2000, quite a feat considering the increasingly moribund condition of the tech markets during the past two years.

The company, which has about 95 employees in total, makes products for data centres -- essentially large computer rooms -- that offer services such as firewalls, virtual private networks and more for big companies and communications carriers.

Its "virtual service switch" products combine the various functions of many different pieces of equipment that typically fill data centres. The idea is that Inkra's unifying "boxes" cut down on equipment and servicing costs.

Greenstone, which was also involved in the previous fundraising round, was instrumental in establishing the networking company's local office along with Battery Ventures, a U.S. firm and another repeat investor.

In 2000, Inkra was looking for a development centre outside San Francisco's Bay Area, said Richard Osborn, a Greenstone partner and co-founder. It was considering countries such as India and Israel along with other U.S. locales.

"We said 'What about Canada. We have a great team for you,'" Osborn recalled.

Greenstone and Battery helped introduce Inkra co-founders Dave Roberts and Sanjay Dhawan to a group of local software engineers that had previously been with Motorola.

This meeting eventually resulted in Inkra Networks Canada, a team that now consists mainly of engineers and is led by Mandeep Dhami.

"There was disbelief of the quality and cost of the people and the operations up here," Osborn said.

"We have so many world-class folks in this town, both from a technical and a management perspective."

The Burnaby site develops some of Inkra's software, and its roster will likely be boosted in coming months with the arrival of more engineers. The firm also began shipping its switching product in July and so more customer support hires are likely as well, said co-founder Roberts, the company's vice-president of marketing.

Times have gone well for Inkra lately. In addition to the money raised, it was recently named a top 50 private company by Red Herring, the renowned U.S. tech magazine.

However, the publication also noted that it faced "stiff competition" from networking titan Cisco Systems Inc. and smaller player Riverstone Networks Inc.

"You can call [the space] somewhat crowded when you have Cisco at the top of the class," said Aalok Shah, a senior research analyst at Pacific Crest Securities in Portland, Ore., adding that he expected to see some consolidation among data centre companies.

Few firms have used an acquisition strategy as deftly as Cisco, which has excelled in buying firms with superior technology to bolster its overall product mix.

However, Shah noted that Cisco has its own in-house data centre technology and so doesn't expect it to make a move.

However, Roberts said Cisco is "getting more and more interested [in Inkra] every day."

Although he admits he'd consider an offer from Cisco -- or any other firm -- he's more interested in pursuing his own path.