Home SDN Startups That Could Become Acquisition Targets In 2013

SDN Startups That Could Become Acquisition Targets In 2013

Software-defined networks (SDNs) are poised to move from market hype to real technology in 2013. International Data Corp. predicts the market size of this disruptive technology will soar from barely existent this year to $3.7 billion by 2016. When a market is expected to grow that much in so little time, big technology players take notice and start shopping for what they won’t have time to build for themselves. IDC is marking five startups that will be high on shopping lists: Big Switch Networks, Embrane, Plexxi, Vello Systems and Midokura.

To get an idea of why this market is so hot, let’s review SDNs and why they are so potentially disruptive. Software-defined networking places control of network resources within a software layer that sits on top of routers, switches and other physical and virtual network devices. This solves the problem of having to use a control panel for each individual device in order to configure, program or perform other management tasks for the network. Making significant changes to a network today can take one to two weeks using the standard tweak-each-router method, but an SDN holds the promise of reducing the time to a few hours. 

For an enterprise market where server elasticity is becoming a hot commodity, imagine what a enterprise infrastructure could do if the network were elastic, as well.

A key enabler of SDNs is the OpenFlow protocol created at Stanford University and the University of California at Berkeley, a standard now under the control of the Open Networking Foundation. Board members of the foundation include Cisco, Juniper Networks, Brocade, Citrix, Hewlett-Packard, Dell and IBM. Not coincidentally, these are the same companies that IDC believes could go on an SDN shopping spree next year.

Here’s a look at each of the company’s that IDC believes could be on the short list of some of these vendors:

Big Switch Networks

In November, Mountain View, Calif.-based, Big Switch Networks released its product suite called Open SDN. The suite includes a controller that can sit on top of roughly 1,000 switches to handle programming and set policy-based functions. Other suite components include a network monitoring application and data center network virtualization software for automated network provisioning.

Since March 2011, the company has raised $39 million from investors, including Redpoint Ventures, Index Ventures and Khosla Ventures. Its founders are Guido Appenzeller, who worked on the OpenFlow standard at Stanford, and Kyle Forster, who was the vice president of product management at Joost before starting Big Switch. They founded Big Switch in 2010.


Founded in 2009, Santa Clara, Calif.-based, Embranereleased its “heleos” software platform a year ago. The product can be used to control a variety of network services, including load balancers, firewalls and virtual private networks. Heleos, which also provides wide-area network optimization, is targeted at cloud environments, whether public, private or hybrid.

Former Cisco executives Dante Malagrino and Marco Di Benedetto founded the company, which has raised $27 million in funding. Investors include venture capital firms Lightspeed Venture Partners, New Enterprise Associates and North Bridge Venture Partners.


Cambridge, MA-based, Plexxi introduced its product strategy this month. The company has built switches that can communicate directly with each other over high-speed fiber optic interconnections. This is meant to replace traditional network architectures that have an access switch communicating with other switches in order to connect two computers, according to MIT Technology Review. The use of access switches can create bottlenecks and unnecessary overhead; something Plexxi is seeking to work around.

Plexxi Chief Executive David Husak founded the company in 2010. Before Plexxi, Husak co-founded Reva Systems and founded C-Port Corp. and Synernetics. Plexxi investors include North Bridge Venture Partners, Matrix Partners and Lightspeed Venture Partners. As of June, the company had raised nearly $48.5 million.

Vello Systems

Founded in 2009, Menlo Park, Calif.-based Vello Systems has been profitable from the start. In each of its first two years, it had roughly $10 million in sales, according to Dow Jones & Company. Vello’s first and only round of funding was for $25 million in 2011. The money came from financial institutions that were also Vello customers.

Vello focuses on using SDN technology for internetworking between cloud data centers. Essentially, the company provides cloud-switching software that optimizes latency sensitive applications, such as content delivery, storage replication, big data connections and cloud services. The company first focused on carrier networking and later expanded into corporate data centers and cloud service providers.


Midokura is a Japanese startup that entered the U.S. market this year. Company Chief Executive Tatsuya Kato and Chief Technology Officer Dan Mihai founded the company in 2010.

Midokura’s flagship product is called MidoNet, which is an intelligent software abstraction layer that manages the internetworking between the hardware infrastructure in an enterprise and the OpenStack cloud-computing platform used in public and private clouds. The company claims its technology reduces complexity, improves fault tolerance, optimizes network traffic and delivers higher availability of servers and services.

Consolidation in the SDN market has already started. In 2012, VMWare bought Nicira for $1.26 billion. In October, Cisco bought SDN startup vCider, which has technology similar to Nicira.

But this is just the beginning. If IDC’s predictions are right, then major tech vendors will be moving a lot faster this year to see who can grab the biggest share of this fast-growing market.

Image courtesy of Shutterstock.

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