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Beacon Telco to boost Verilink into optical fiber market

By David J. Craig

Beacon Telco, a new venture capital development firm backed by BU, soon could help make Veri-link Corporation a prominent player in the market for optical access networking equipment.

Under an agreement made last month, Beacon Telco and the BU Photonics Center will assist Verilink, a Huntsville, Ala., high-tech company, in developing computer optical hardware for connecting to high-speed telecom-munications networks -- partly by providing access to the Photonics Center's facilities and technology experts -- in exchange for up to 15 percent of the company's stock.

Alok Prasad, president of Beacon Telco, a venture capital development firm backed by BU, says that his goal is to help start-ups in the optical and broadband networking market "through all the steps of building a company." Photo by Kalman Zabarsky

Beacon Telco is the first company launched by Beacon Photonics, a private holding company created in April by the Photonics Center, Boston University, and Globalvest Management Company, for the purpose of creating venture capital firms in photonics-related industries. Beacon Telco provides capital as well as managerial support and consulting services for start-ups and early-stage companies in the optical and broadband networking market.

"In the case of Verilink, we're actually not providing capital, but we're giving them a range of advice, support, and access to technologies, in exchange for equity," says Alok Prasad, president of Beacon Telco. "There's a bottleneck for broadband Internet access right now, and Verilink wants to be a provider of the equipment that allows access to the high-speed networks. Basically, we're assisting them through all the steps of building a company."

Verilink is an established company, specializing in "business-to-business connectivity solutions," according to its literature, but intends to rebuild itself as a manufacturer of computer hardware that would allow network service providers to connect their customers over broadband access services such as T1, DSL, and fiber optics. Fiber optic--based telecommunications lines are replacing conventional copper wires.

"Fiber optics will have a significant impact on the telecommunications access market because optic fiber can send more data faster, compared to wire," says Shawn Burke, deputy director of the Photonics Center, who is part of a steering commitee overseeing the development of Verilink's new products. "There are a couple of start-ups that have products out in this market, but there's still a lot of opportunity."

Although Verilink already has in place a management team, distribution channels, and relationships with potential customers in the access market, repositioning a company into a fast-moving marketplace is a formidable challenge. Beacon Telco, which is located at the Photonics Center, will also put Verilink in touch with potential investors, suppliers, and customers, Prasad says.

"It's difficult for even an established company to get into a hot new market like broadband access," he says, "because a company is unlikely to have the right resources and technological expertise on board to make a major shift. We're providing the expertise Verilink needs to migrate the company into the target market, and get a product developed quickly.

"We're also building relationships between Verilink and large companies with which we already have business relationships," Prasad continues. "These companies could turn out to be Verilink's lead initial customers, alliance partners."

Technological capital

The Photonics Center added an important tool to its business incubation program this year when BU created Beacon Photonics, and through it, Beacon Telco. The program, which for the last three years has been helping start-ups develop innovative products, has not directly provided capital or management assistance.

"A key element missing from the incubation program, until we partnered with Beacon Photonics, was the access to capital and management expertise," says Burke. "This really fills out our palette."

Beacon Telco plans to back 15 to 20 early-stage companies in the photonics and broadband market sectors each year, according to Prasad, usually investing between $1 and $3 million in any given funding round. Many of those companies will also participate in the Photonics Center's incubation program.

Beacon Telco also intends to create two to three companies a year and place them in the incubation program, says Prasad.

Currently, Beacon Telco is also assisting IntelCore Technologies, a Photonics Center incubator company and specialty fiber company, develop products used in broadband access. IntelCore received an investment from Beacon Photonics in July, and is using the Photonics Center's facilities.

According to Burke, it is Beacon Telco's relationship with BU that makes it unique as a venture capital firm. "Having the Photonics Center as a partner, Beacon Telco is able to provide access to an incredible amount of technological expertise," he says. "That distinguishes it from a firm that just offers money. Our partnership provides significant value to a young company."

Beacon Telco is currently operating on seed money provided by Beacon Photonics and Pittiglio, Rabin, Todd, and McGrath (PRTM), a management consulting firm that Beacon Telco will leverage to provide management consulting support to portfolio companies. Beacon Telco will hold two more rounds of funding over the next six months, according to Prasad.

10 November 2000
Boston University
Office of University Relations