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DriveNets, a networking company for service providers, has become a unicorn. The company entered the elite club of startups with a $1 billion valuation after raising $208 million in its second round of funding.
A new investor, D1 Capital Partners, led the Series B funding reported this week. Other contributors included existing investors Bessemer Venture Partners and Pitango, and new investor Atreides Management.
Industry analysts attribute DriveNets' success to the technology it has developed to separate the software that controls network traffic from the physical routers. Called network disaggregation, the separation of the control plane from the underlying hardware lets communication and cloud service providers use commodity routers instead of more expensive specialty hardware from Cisco or Juniper Networks.
Operators of megascale data centers, such as Facebook, Microsoft and Google, use a similar network architecture. Sales of the merchant network silicon, white box routers and optical equipment they use have grown significantly faster than network infrastructure for traditional data centers.
DriveNets claims its technology is more efficient to scale, reduces operational complexity and provides lower capital and operating expenses. One of the Israeli company's premiere customers is AT&T.
"It's relatively early for DriveNets, but the AT&T relationship and the funding are notable validations [of its technology]," IDC analyst Brad Casemore said.
According to IDC, the hurdles DriveNets faces include convincing service providers to change their processes for procuring, deploying and managing router infrastructure. Such a massive redesign of internal processes and management systems could slow the adoption of DriveNets technology.
But company co-founder Hillel Kobrinsky said DriveNets eases the transition by having its product handle just the legacy network's capacity growth.
"The first step -- the baby step -- is to put the two systems in parallel and start absorbing the growth," Kobrinsky said. Over several years, the DriveNets network load will increase and eventually reach a point where it can fully replace the old system.
AT&T has taken a similar "step-by-step" approach to introduce DriveNets into its core routing infrastructure, Kobrinsky said. He declined to provide further details.
DriveNets hosts its network control plane on microservices, a cloud-native technology that runs on top of the commodity hardware. To increase network capacity, customers add more routers.
DriveNets and other network startups feed service providers' hunger for new technology that can cut costs as network capacity rises to accommodate increasing internet traffic.
"The big hope of most operators today is white boxes that can be paired with network software to create a disaggregated model," said Tom Nolle, president of consultancy CIMI Corp., which specializes in telecom technology.
DriveNets plans to make its architecture more appealing by using the latest funding round to convert network services into microservices, Kobrinsky said. Examples of services include Peering, and aggregation and core routing.
DriveNets can reduce costs by running more network services on existing commodity routers.
"You don't need to buy more hardware," Kobrinsky said. "You just buy the piece of software that gives you [the new network] function."
The model is different from incumbent vendors that have built a business model around convincing customers to buy more expensive hardware. "We are maximizing the utilization of each of the ports, each of the chipsets, that you have in the underlay," Kobrinsky said.
Antone Gonsalves is the news director for TechTarget's Networking Media Group. He has deep and wide experience in tech journalism. Since the mid-1990s, he has worked for UBM's InformationWeek, TechWeb and Computer Reseller News. He has also written for Ziff Davis' PC Week, IDG's CSO Online and IBT Media's CruxialCIO, and rounded all of that out by covering startups for Bloomberg News. He started his journalism career at United Press International, working as a reporter and editor in California, Texas, Kansas and Florida.