BroadIP partnership deal allows customers to lease its PacketCop 8/21/00 By Fayçal Benhassain BroadIP Networks Inc., a bandwidth management solutions provider founded only in February, is already making its presence felt in a growing area — the broadband Internet market. After just six months in business, the Manassas, Va., company has begun shipping its first 10 prototype units to customers. Its PacketCop product directs the flow and speed of packets of data, organizing them according to customers’ requirements. BroadIP has also signed a partnership with eLease, a Sunnyvale, Calif., company that delivers Web-enabled leasing solutions. The partnership will give BroadIP’s customers a variety of payment options to buy or lease PacketCop’s service-level management solutions. BroadIP Chief Executive Officer Leslie Poole said the partnership is already paying dividends. “We sold five PacketCops to a small regional [Internet service provider] through eLease,” he said. “Each unit costs approximately $10,000, and the purchase would have cost our customer $50,000. For this kind of company, there’s a big difference between paying that much versus a couple thousand dollars a month to lease this equipment. They went to eLease’s Web site, followed the procedure and got the units. And we got the full amount immediately.” ELease has an exclusive partnership with BroadIP, said Tova Jaffe, vice president of corporate development with the California company. “BroadIP is using our technology for its customers. A salesperson comes to us and says there is a customer who wants to buy a certain number of PacketCops. Through us, BroadIP provides its customers with the ability to choose from several options to fit their budget,” she said. BroadIP offers two versions of PacketCops, one costing $7,500 and the other around $10,000. So far the company has orders for 17 units. “Elease will be an important part of our revenue model in the future,” Poole said. “We are setting up a network operation center in Northern Virginia that will allow us to communicate with those boxes once they are in the field. We will offer various enhancements and upgrades,” he said. “It’s easier to offer follow-up services to our customers if they pay less monthly for the equipment.” Osborn Capital LLC, an investment firm with offices in Massachussetts as well as in Alexandria, McLean and Leesburg, Va., was one of the lead investors in the angel round that raised $750,000 in June. Jeff Osborn, principal at Osborn, said it was clear that BroadIP had something of value. “I saw that BroadIP was working on a very interesting piece of infrastructure to build for the Internet,” Osborn said. “The technology is great. Then, of course, they presented a credible plan that showed a positive cash flow and break-even shortly. As a technical person, I understood the technology quickly and decided to go with them.” BroadIP’s competitors include Allot Communications Inc, located in Israel, and Packeteer Inc., a Cuppertino, Calif., provider of Internet application infrastructure systems. But Poole said he is not worried. “No one is going to market the way we are,” he said. “And no one has the customized solution we propose to customers — not just in term of the product, but in terms of the overall package that we offer.” Osborn also is not concerned about BroadIP’s competition. “If the growth is fast enough, there is room for other companies,” he said. “PacketCop is well priced and after only a few months they have already sold almost 20 units. So I do think it’s a good technology.” The company is working on another product, too — ThinWave, a wavelet compression suite capable of compressing both video and audio data at a fast compression ratio in excess of 70:1. And Poole said BroadIP’s technology should be easy to adapt to the mobile wireless market. BroadIP, created after two years of research and development, is now preparing its first institutional round of funding. “We have a goal to raise $10 million by the end of the year,” Poole said. “We also do have explicit profitability goals. We know that the market we are in is ready to explode. So we wanted to be in it early to establish a dominant position and grow with it.” The BroadIP CEO predicts profitability between the fourth quarter of 2001 and the first quarter of 2002.