Scoop: Big Switch nails $25M for software defined networking push

Guido Appenzeller (left) and Kyle Forster of Big Switch

Software-defined networking pioneer Big Switch netted $25 million in Series B funding from new investors Redpoint Ventures and Goldman Sachs. The Palo Alto-based company will use the cash to add to its engineering staff as it heads toward product launch, co-founder and CEO Guido Appenzeller said. The news is to be announced Wednesday.

Founded two years ago by Appenzeller and Kyle Forster, Big Switch’s big bet is that companies want to be able to add nifty new features — even applications — to their network infrastructure without buying expensive, often proprietary hardware. In that arena, it is seen as a rival to Nicira, the SDN company that VMware bought for nearly $1.3 billion in July.

Given the huge Nicira valuation, Big Switch’s $25 million round (which brings its total venture funding to about $39 million) seems small, but Appenzeller said he is thrilled with the funding and with the opportunity to work with Redpoint General Partner Satish Dharmaraj, who will advise the company. Existing backers Index Ventures and Khosla Ventures also participated in this round.

There were rumors a few months ago that EMC Ventures wanted to make a large investment in Big Switch. And given that EMC owns 80 percent of VMware — which now controls Nicira — that would have given EMC considerable sway in the SDN market. No one at Big Switch would comment on EMC but they did say there was considerable interest by many parties who wanted to participate in this round. The company still considers itself in stealth mode with several unnamed companies using an early version of its SDN controller.

Appenzeller, who started Big Switch after an academic career at Stanford, is bullish about the prospects for this technology and the ability for small, lean startups to compete with even big companies. (Perhaps big companies like VMware?)

“We have a good head start. When we initially launched we had to apologize for starting a networking company. That’s definitely changed — networking is a vibrant sector,” he said. “This is completely different from the past. Big Switch is a very deceptive name — we build controllers for SDN but we don’t build or ship any hardware,” he said.

Dharmaraj concurred. Big Switch “could have raised a lot more money if they wanted … but this is not a traditional networking play like a Juniper or a Cisco, which required $50 million to $100 million. They’re building software! They don’t need to build special ASICs or other hardware,” he said.

After the Nicira deal, the conventional wisdom was that Big Switch — or maybe Embrane — would be the next SDN company on the block. That may or not be case but in the short term, it looks like Big Switch will forge ahead on its own, with a little help from its new VCs.

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