Entrepreneur copes with aftermath of funding nightmare
Easy money. That's how it felt a year ago when Charles Corbalis started hitting up investors to finance his company, Calient Networks.
Within weeks of founding the company in March 1999, Corbalis raised $6 million in his first round of financing. So he was in no rush to get more, thinking that financing would be the least of his worries in running a complicated business that makes software used in photonic switching systems.
The second round, for $50 million, was secured in March 2000, just before the markets began their perilous slide. "The optical switching market was white hot, so it was easy to raise money on our terms," said Corbalis, chief executive of Calient.
Then came the big drought, and investment money dried up as the markets took a nosedive. Like so many other technology entrepreneurs, Corbalis was caught off guard by the 180-degree turn in attitudes toward financing start-ups.
"The money came too fast," he admits. "We had to sit down and figure out what to do with it."
Stories like this are commonplace among dot-com start-ups with questionable business models, but the industry's investment shutdown pained all companies, even those run by people like Corbalis, who is considered the father of ATM frame relay switching and who co-founded StrataCom, which was later purchased by networking giant Cisco Systems for $4 billion in 1996.
His formidable background undoubtedly played a part in Calient eventually raising $195 million, the largest amount of venture capital amassed in a single round by any company during the fourth quarter last year, according to research firm VentureOne. But getting the money was an arduous undertaking.
Corbalis soon found he was pounding the pavement and constantly on the phone to keep investors together in the third round, though just nine months ago it took only one call.
"In the second round, all we needed was one meeting with investors and a phone call to get the round locked in," Corbalis recalled. "But in the third round, we had some new strategic investors who would say something like they'd put in $10 million but the next week they'd drop it down to $5 million. We were sitting on pins and needles. We were trying to get those that committed to hold on while we got others committed."
All of this taught Corbalis a valuable lesson.
"The easy money of (early) 2000 gave me a false security. I didn't spend the time I needed with strategic investors so I could rely on them when the markets started to go south," he said. "I could have probably closed the third round a lot faster if I had spent more time up front with the relationship."
That real-life education provides a strong incentive for Corbalis to succeed at Calient, which will be shipping its prototype software for early customer trials in the next few months. Corbalis says he is as motivated today as when he was president of engineering at StrataCom. After it was sold, he stayed on as vice president and general manager of Cisco's wide-area switching network business for two years before getting back into the entrepreneurial life with Calient.
The experience has also carried personal meaning, as a way to deal with his fear of failure. "The hardest challenge is learning how to avoid letting it take over and rule your life," he said
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