Arguing that bandwidth should be bought and sold as an intangible commodity like electricity or cable television service, InvisibleHand Networks Inc. has developed an automated platform that allows customers to purchase only the bandwidth they use, rather than a predetermined amount. But there is a catch: most venture capitalists still needs to be convinced that the peering and enterprise markets are prepared to embrace such an innovation.
InvisibleHand learned that lesson the hard way earlier this month, when it was forced to postpone a $10 million to $15 million Series B deal despite having already met with approximately 25 venture groups.
“The biggest push back was not one of idea, but one of adoption and revenue,” said Glenn Ricketts, chief executive of InvisibleHand and former chief marketing officer with Nortel Networks Inc. “We?ll be back out at the end of this year, at which point we?ll be able to show them what they?re looking for.”
In the meantime, the company was able to add a bit more cash to its coffers by reopening a Series A deal that had originally closed in May 2000 at $5.5 million. The second tranche transaction netted $2.5 million from existing investor < $iPolaris Venture Partners> at a post-money valuation of $22 million.
“Getting more money is really just a proof of concept issue,” said Jim Brown, general partner with Polaris. “And I think they are on their way to proving it.”
Indeed, InvisibleHand?s flagship product — a dynamic trading platform that enables people to buy actual flow in real-time across the bandwidth network — is already deployed and acquiring enterprise customers through hosting facility Equinix Inc., and will soon start up beta testing with Exodus Communications Inc. The eventual goal is to acquire carrier customers through agreements with peering companies.
“We are clearly benefiting the customer?s bottom line, but we can make money because everyone?s demand is different and we can overlay one on top of another as different users? needs rise and fall,” Ricketts said. He added that the model is based on a mathematical algorithmic formula.
Dan Primack can be contacted at Daniel.Primack@tfn.com