Arbor Networks Acquisition Is a Tale of Two Cities—and a Strategic Move Into Wider World of Wireless

8/12/10Follow @gthuang

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provider has used Arbor’s software to keep things running smoothly.)

Jahanian and Malan’s team raised a Series A venture round in 2000, led by Battery Ventures and Cisco Systems, and then a Series B round in 2002, led by Thomas Weisel Venture Partners. Those two rounds, the only outside funding taken by the company, were worth about $33 million. (Because the Danaher acquisition price hasn’t been disclosed—and Arbor’s leaders kept their poker faces on, giving me no indication of the size of the financial win—it’s hard to know yet how well the investors made out.)

In its early days, Arbor made an important decision: to put the company’s headquarters in the Boston area while keeping the core engineering team in Ann Arbor. “We knew we could build a phenomenal R&D team in Ann Arbor,” Jahanian says. “But to recruit the quality of executives [we wanted], we had to be either on the East or West Coast.” The combination of Battery Ventures being in the Boston area, the strong local business talent, and proximity to the East Coast’s big wireless carriers and Internet service providers swung the decision in Boston’s favor, he says.

Arbor worked its way deep into the market over the next few years, becoming profitable relatively quickly. It wasn’t easy. Network security, starting around 2000, was one of the most crowded and contested fields in all of IT, full of competitors like Riverbed Technology, Lancope, Mazu Networks, and Asta Networks, as well as big companies like IBM. From what I hear, it’s pretty amazing that Arbor (or anyone for that matter) survived this hostile sector. Arbor seems to have done so through deep relationships with big customers and partners like AT&T, Verizon, British Telecom, Yahoo, and Cisco.

“Protecting mission critical networks…has challenged us from day one,” Jahanian says. “When you have to work with the largest carriers in the world, and enterprises from healthcare to financial services, that pushes you to innovate.”

Other keys to survival were probably the company’s technology and the … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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