Personal blog of Yzmir Ramirez

People and businesses are relying on the internet to get things done more than ever before, an opportunity but also an infrastructure headache for service providers that need to scale quickly and reliably to meet that demand.

Today, a startup that has built a clever, software-based way for them to expand their networks without buying costly equipment is announcing a major round of funding on the back of its business booming.

DriveNets — which provides software-based routing solutions to service providers that run them as virtualized services over “white box” generic architecture — has closed $208 million in funding, a Series B that values the company at over $1 billion post-money.

The plan will be to use the funding to continue building out the business internationally and to tailor it to more use cases beyond carriers, including the wave of bigger companies that stream large amounts of media and have some control over their networks as a result.

Future deals are still under NDA, CEO Ido Susan said, but he described the opportunity as a clear one: “If you want to serve bandwidth with low latency, if you want to offer strong 5G capability or cloud gaming, you need to be close to your end customer.”

The Series B is being D1 Capital Partners. Previous backers Bessemer Venture Partners and Pitango (which co-led DriveNets’ previous, $110 million round when it emerged from stealth) also made a significant investment, and Atreides Management also participated. This latest round was made at more than double DriveNets’ valuation in 2019.

D1 has been an especially prolific investor in the last year, going big on businesses that are seeing a lot of attention as a result of pandemic conditions. They include e-commerce giants Warby Parker and Instacart, fintech TransferWise, gaming engine Unity, online car sales platform Cazoo, and transportation startup Bolt.

DriveNets’ big round is based both on bigger trends in the market, as well as its own strong record.

Before this round, DriveNets had already counted AT&T among its customers, a major vote of confidence for the company and its virtual network approach, but it seems that recent circumstances and the spike in internet activity have brought more providers to consider its approach.

“The internet was growing 30%-40% annually even before Covid-19,” said Susan. “But even five years ago, incumbent carriers were coming to us saying, said no one can build virtual networks. Now, it’s not a question of whether it works or not, but when you will adopt it.”

Recent momentum for the company’s sales, he said, is very good. “Everyone is working and studying from home so you need more capacity and bandwidth in the network,” he added. 

DriveNets’ core product is a more flexible and cost-effective replacement for the traditional network router that relies on virtualized architecture. Traditionally, routers have been sold as vertically-integrated hardware solutions, bringing together both software and hardware into one branded big box, with companies like Cisco and Juniper Networks dominating the space.

In their place, as Susan and co-founder Hillel Kobrinsky envisioned it, DriveNets provides a solution that is based around generic white boxes. It currently works with three providers for these boxes, Susan said.

These work in conjunction with a system it has developed called Network Cloud, which in turn runs a networking stack called the DriveNets Operating System. Service providers control their systems of white boxes and other servers through a virtualized service run over Docker containers, using open APIs to automate and configure various network services.

This allows for more flexibility in capacity among the white box servers, but they can also be easily added and removed as needed. Essentially, it’s a system that disaggregates the software from the hardware, to make expanding the hardware much easier, and controlling the software significantly more flexible to boot.

(Ironically, my conversation with Susan took place over Zoom with him in his home office, which also doubles as a DIY workshop. So with a full array of hardware equipment surrounding Susan, we talked about how software would come to dominate the world.)

It’s a disruptive concept that potentially steps on a lot of toes, but Adam Fisher, a partner with Bessemer, said that he’s confident it’s one that will continue to gain traction.

“We are extremely enthusiastic about the company,” he said. “Aside from Ido and Hillel as entrepreneurs, we really connected with their vision. Network routing is moving to software and cloud architecture. We’re talking not just about the small parts here but the hearts and lungs of the system. DriveNets is starting with the hardest parts. Once one customer becomes multiple customers, you just realise it’s the future.”

As 5G slowly moves from being a theoretical to an active part of the coverage map for the mobile industry — if not for consumers themselves — companies that are helping carriers make the migration less painful and less costly are seeing a boost of attention.

In the latest development, Cellwize, a startup that’s built a platform to automate and optimize data for carriers to run 5G networks within multi-vendor environments, has raised $32 million — funding that it will use to continue expanding its business into more geographies and investing in R&D to bring more capabilities to its flagship CHIME platform.

The funding is notable because of the list of strategic companies doing the investing, as well as because of the amount of traction that Cellwize has had to date.

The Series B round is being co-led Intel Capital and Qualcomm Ventures LLC, and Verizon Ventures (which is part of Verizon, which also owns TechCrunch by way of Verizon Media) and Samsung Next, with existing shareholders also participating. That list includes Deutsche Telekom and Sonae, a Portuguese conglomerate that owns multiple brands in retail, financial services, telecoms and more.

That backing underscores Cellwize’s growth. The company — which is based in Israel with operations also in Dallas and Singapore — says it currently provides services to some 40 carriers (including Verizon, Telefonica and more), covering 16 countries, 3 million cell sites, and 800 million subscribers.

Cellwize is not disclosing its valuation but it has raised $56.5 million from investors to date.

5G holds a lot of promise for carriers, their vendors, handset makers and others in the mobile ecosystem: the belief is that faster and more efficient speeds for wireless data will unlock a new wave of services and usage and revenues from services for consumers and business, covering not just people but IoT networks, too.

Notwithstanding the concerns some have had with health risks, despite much of that theory being debunked over the years, one of the technical issues with 5G has been implementing it.

Migrating can be costly and laborious, not least because carriers need to deploy more equipment at closer distances, and because they will likely be running hybrid systems in the Radio Access Network (RAN, which controls how devices interface with carriers’ networks); and they will be managing legacy networks (eg, 2G, 3G, 4G, LTE) alongside 5G, and working with multiple vendors within 5G itself.

Cellwize positions its CHIME platform — which works as an all-in-one tool that leverages AI and other tech in the cloud, and covers configuring new 5G networks, optimizing and monitoring data on them, and also providing APIs for third-party developers to integrate with it — as the bridge to letting carriers operate in the more open-shop approach that marks the move to 5G.

“While large companies have traditionally been more dominant in the RAN market, 5G is changing the landscape for how the entire mobile industry operates,” said Ofir Zemer, Cellwize’s CEO. “These traditional vendors usually offer solutions which plug into their own equipment, while not allowing third parties to connect, and this creates a closed and limited ecosystem. [But] the large operators also are not interested in being tied to one vendor: not technology-wise and not on the business side – as they identify this as an inhibitor to their own innovation.”

Cellwize provides an open platform that allows a carrier to plan, deploy and manage the RAN in that kind of multi-vendor ecosystem. “We have seen an extremely high demand for our solution and as 5G rollouts continue to increase globally, we expect the demand for our product will only continue to grow,” he added.

Previously, Zemer said that carriers would build their own products internally to manage data in the RAN, but these “struggle to support 5G.”

The competition element is not just lip service: the fact that both Intel and Qualcomm — competitors in key respects — are investing in this round underscores how Cellwize sees itself as a kind of Switzerland in mobile architecture. It also underscores that both view easy and deep integrations with its tech as something worth backing, given the priorities of each of their carrier customers.

“Over the last decade, Intel technologies have been instrumental in enabling the communications industry to transform networks with an agile and scalable infrastructure,” said David Flanagan, VP and senior MD at Intel Capital, in a statement. “With the challenges in managing the high complexity of radio access networks, we are encouraged by the opportunity in front of Cellwize to explore ways to utilize their AI-based automation capabilities as Intel brings the benefits of cloud architectures to service provider and private networks.”

“Qualcomm is at the forefront of 5G expansion, creating a robust ecosystem of technologies that will usher in the new era of connectivity,” added Merav Weinryb, Senior Director of Qualcomm Israel Ltd. and MD of Qualcomm Ventures Israel and Europe. “As a leader in RAN automation and orchestration, Cellwize plays an important role in 5G deployment. We are excited to support Cellwize through the Qualcomm Ventures’ 5G global ecosystem fund as they scale and expedite 5G adoption worldwide.”

And that is the key point. Right now there are precious few 5G deployments, and sometimes, when you read some the less shiny reports of 5G rollouts, you might be forgiven for feeling like it’s more marketing than reality at this point. But Zemer — who is not a co-founder (both of them have left the company) but has been with it since 2013, almost from the start — is sitting in on the meetings with carriers, and he believes that it won’t be long before all that tips.

“Within the next five years, approximately 75% of mobile connections will be powered by 5G, and 2.6 billion 5G mobile subscriptions will be serving 65% of the world’s population,” he said. “While 5G technology holds a tremendous amount of promise, the reality is that it is also hyper-complex, comprised of multiple technologies, architectures, bands, layers, and RAN/vRAN players. We are working with network operators around the world to help them overcome the challenges of rolling out and managing these next generation networks, by automating their entire RAN processes, allowing them to successfully deliver 5G to their customers.”

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