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Start-up Ennovate prefers to fight alone

The firm is determined to go it alone in the networking market, even as its rivals are acquired by larger established companies.

Start-up Ennovate Networks is determined to go it alone in the networking market, even as its rivals are acquired by larger established firms.

Ennovate builds networking equipment for service providers to offer businesses Virtual Private Network (VPN) services. The technology offers businesses inexpensive and secure high-speed connections to corporate networks over the Internet.

Networking leaders Cisco Systems, Ericsson, Nortel Networks and Siemens, as well as smaller firms such as Spring Tide Networks and Cosign, are all battling for a piece of this emerging networking market that is expected to grow to $14.4 billion in 2002, according to analyst firm Forrester Research.

Larger firms that have focused on other parts of the networking world have jumped into the VPN market by purchasing smaller start-ups. Nortel bought Shasta Networks, Ericsson purchased Torrent Networking Technologies, while Siemens bought Redstone Communications.

Ennovate founder and president Ian Mashiter believes those acquired firms missed a huge opportunity, as independent networking start-ups Juniper Networks and Sycamore Networks have shocked Wall Street with stellar stock gains.

Ennovate has raised $22 million in venture capital funding and hopes to raise more in a separate round. The extra funds will help pay for marketing as well as for research and development costs, and help it develop an initial public offering, Mashiter said.

"The last year has shown you can build a business in the public market as long as you have good technology and good people," Mashiter said. "There's money out there to back companies like ours."

Dataquest analyst Tim Smith thinks that Ennovate will face some stiff competition, even though the market is still new.

"The marketplace is very new, very young, so all the companies are roughly in the same state of just getting their products to the market," Smith said. "There's no one clear leader that has emerged. It's a horse race to get their foothold established."

Smith even suggested Ennovate partner with another networking start-up that offers complimentary technology to better compete. Juniper's high-speed routers would go well with Ennovate's network switches, he said.

"That would create a solution that would be powerful," Smith said.

The VPN market is expected to take off as it gets marketed as a new way of networking that can save businesses money. Previously executives on the road had to dial into corporate networks with a special number or over an expensive leased line. With VPNs, that same executive can log onto a network by calling a local Internet service provider number, eliminating the need for expensive toll calls.

Ennovate plans to ship its products, currently in testing, in volume early next year. The company also plans on Monday to announce new software that will let service providers manage and monitor VPN systems to make sure they're working properly.