Wavesmith lands $30 million may have Verizon deal

Multi-service switching startup Wavesmith Networks announced today that it has secured another round of funding as well as a potential deal with Verizon Communications. The new round, worth $30 million, includes a $5 million infusion from Ciena.

The deal will enable Ciena to sell Wavesmith’s equipment and is strikingly similar to the previous one Ciena has with Equipe Communications. In that deal, Ciena was part of a $40 million round for Equipe. Together, the two deals give Ciena a Layer 2 strategy to compliment its current Layer 1 strategy. It has also been rumored that Ciena may eventually buy the two startups.

The threesome is apparently close to winning a deal from Verizon Communications, which was confirmed by Bob Dalies, president and CEO of Wavesmith.

“By early 2003, we should know where they stand,” Dalies said. According to industry sources, Verizon is testing the Equipe and Wavesmith boxes and may use Ciena as service and support for the startup’s equipment (as reported by Telephony’s Optical Insight newsletter). Verizon also is testing equipment from Alcatel, which will likely make negotiations even tougher.

Dalies noted that Wavesmith also is making inroads at other RBOCs. “We have some other deals in the works,” Dalies said. “Some aren’t as big as Verizon, some are bigger.” And that’s one of the places where Ciena’s help is paying off for Wavesmith.

“This takes us beyond the startup perception—we get a much greater chance of securing deals,” he said.

With the $30 million round, Wavesmith’s total funding is at $84.5 million. The new round will be used for operations and selective hiring, according to Dalies. It also includes new investor Argonaut Private Equity Management and previous investors Atlas Ventures, Bessemer Venture Partners, Commonwealth Capital, and Fidelity Ventures.