Meet communications capitalist David Hathaway

After a slew of lucrative investments in the likes of StrataCom, Lightera Networks and TransMedia, venture capitalist David Hathaway now lives on the edge - the edge of the network, that is.

Hathaway sees some of the most promising communications businesses of the new century in the problem of broadband access - the new network choke point.

"The real challenge is that we have all this bandwidth at the core, but for people to access it is still an arduous, laborious process," said Hathaway, who is managing general partner of Venrock Associates.

Venrock's current communications investments lean toward increasing network efficiency, particularly on the access side, and putting more intelligence into the network. A prime example of the first is Appian Communications, a Boxborough, Mass.-based equipment provider. Venrock was one of three VC firms that invested $22 million in Appian in January.

Still operating in "stealth mode," Appian develops products for the optical edge of service provider networks. In January, it became a founding member of the Optical Domain Service Interconnect, an effort led by Sycamore Networks to speed development of open service interfaces between the optical core and higher layer network devices.

Appian's founder and CEO is Mick Scully, who previously held senior positions at Wellfleet Communications and Bay Networks, leads Appian. Hathaway is on the board of directors.

"We've had great interest from carriers and beta customers," Hathaway said. "[Appian] has all the indications of being an outstanding company."

Playing the intelligence angle, Hathaway is betting on General Bandwidth of Austin, Texas, a developer of equipment for toll-quality voice services over broadband networks. Venrock was one of four VC firms that participated in the company's $12 million first-round funding in November 1999 and participated in a $24 million second round announced last week.

General Bandwidth introduced its first product, a protocol-independent voice gateway for DSL, cable and wireless, in February, said Brendon Mills, president and CEO. The product, called G6, resides in central offices and allows packetized networks to communicate with the legacy circuit-switched network.

"It's a new, cheaper way of bringing local telephone service to end users over packetized networks," Mills said. "Customers will be able to add and drop new phone lines instantaneously over the Web."

All this is far from the heritage of New York-based Venrock, the VC arm of the Rockefeller family. Started by Laurance Rockefeller, the firm's first investment was Eastern Airlines in 1938. In 1969, the Rockefeller family stepped back from direct control of the operation after its interests turned to politics, conservation and other businesses. Though Venrock still manages Rockefeller money, it also receives funding from a number of university endowments and foundations.

Hathaway has been at the center of that success for 20 years, seeking out entrepreneurs and business plans that fit Venrock's strategic road map for the communications marketplace.

"We spend a lot of time just wearing out shoe leather, going to conferences, talking to network administrators, asking them about the needs they have and trying to find opportunities that will help address those needs," he said.

In his services portfolio, Hathaway points to 2nd Century Communications as an investment of which he's particularly proud. 2nd Century aims to deliver high-speed Internet, fax, local and long-distance and video services to businesses over a single trunk line. The company serves businesses in 11 cities and expects to add 19 more by the end of the year. "We were ahead of the curve here, and it's paid huge dividends," Hathaway said.

On the wireless front, Venrock is just as edgy, providing seed money for companies such as Metawave Communications, Tantivy Communications and Airspan Networks.

What Venrock looks for in a venture hasn't changed since the days of Laurance Rockefeller: a great management team with a compelling product idea that has a profound value proposition. Just as critical, the product should address a potentially huge market. And don't forget first-mover advantage.

"Being first - or being among the top two or three in a big market - is the most important thing," Hathaway said.