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Start-up snags $34 million for high-speed services

Ellacoya Networks secures $34 million in initial funding to tackle the emerging market for hardware and software that can add intelligence to high-speed networks.

Start-up Ellacoya Networks snagged $34 million in initial funding today to tackle the emerging market for hardware and software that can add intelligence to high-speed networks.

The Merrimack, N. H.-based network equipment entrant, named after a nearby state park, hopes to resolve an ongoing dilemma for telecommunications service providers of all types: how to differentiate their network services so they can move beyond the business of providing simple connections for companies. In other words, Ellacoya wants to help communications carriers fill the network pipes they sell.

In doing so, Ellacoya hopes to grab a piece of the booming market for high-speed, or "broadband," connections. The explosion of Net and private data network traffic has resulted in runaway growth for optical-based network construction and cable and digital subscriber line (DSL)-based Net access for companies and consumers.

"(Service providers) really want more control over provisioning, delivering and creating services," said Christin Flynn, senior analyst with telecommunications industry consultants the Yankee Group.

Ellacoya's network switch hardware and software, currently in tests and scheduled to reap revenue by the third quarter of this year, will allow a service provider to set up a connection and tailor a set of services for a particular business niche, such as a law firm. The technology could be particularly useful for an emerging set of communications carriers like Allied Riser, Urban Media and Cypress Communications targeting office parks and high-rise apartment complexes and office buildings, according to analysts.

"They've identified an important issue," said Andrew Cray, senior analyst with industry consultants the Aberdeen Group.

Ellacoya, founded in January of last year, is the brainchild of two former executives from nearby Cabletron Systems: Kurt Dobbins, president, and Dan Hullette, vice president of research and development.

Dobbins realized that despite his position as the chief technology architect at Cabletron, he could not see his innovations through at the large networking firm as they evolved from concept to revenue producing systems.

"You don't own the whole process," said Dobbins, who joined Cabletron 10 years ago before it went public.

The company garnered funding from Bessemer Venture Partners, Weiss, Peck & Greer Venture Partners, Centennial Ventures and Lighthouse Capital Partners.

Ellacoya will face competition from the usual network equipment suspects, such as Nortel Networks and Cisco Systems, as well as from an emerging set of companies coming at the market from different angles like Redback Networks, CoSine Communications, Springtide Networks and Abatis Systems, among others.

But Dobbins believes his company's concept, internally known as a "service agency," will catch on, boosted by the company's use of directory services software technology, which acts as a sophisticated database for a variety of information. Through use of such technology, Ellacoya will be able to link specific customer preferences to specific software applications, such as video conferencing, allowing a service provider to tailor the services they offer as needed and milking more revenue out of each connection, executives said.

Ellacoya has grown from 24 employees as of last November to nearly 130 today, Dobbins said.