DriveNets raises $262M to expand its cloud-based alternative to core network routers

Israel based DriveNets provides software-based internet routing solutions to service providers to run them as virtualized services over a “network cloud” based architecture using “white box” hardware.   Founded in 2016 by serial entrepreneur Ido Susan, with the objective of developing a cloud-based virtual router platform as an alternative to the chassis-based IP routers from companies like Cisco, Juniper Networks, Nokia and Huawei.

Today, the company announced it has secured $262 million in a Series C venture capital funding round, considerably increasing the company’s valuation over its January 2021 Series B round. The funding from this latest round of investment will be used to develop future technology solutions, pursue new business opportunities, and expand the company’s global operations and support teams to support growing customer demand.

The round was led by D2 Investments with the participation of DriveNets’ current investors, including Bessemer Venture Partners, Pitango, D1 Capital, Atreides Management, and Harel Insurance Investments & Financial Services.  With this round, DriveNets has now raised just over $580 million.

“DriveNets’ approach of building networks like cloud allows telecom providers to take advantage of technological efficiencies available to cloud hyperscalers, such as cloud-native software design and optimal utilization of shared resources across multiple services,” said Ido Susan, DriveNets founder and CEO. “This latest round of investment demonstrates our investors and customers’ confidence in us and will enable us to expand the value and global operational support we offer them.”

“Most of our customers are tier 1 and 2 service providers and we found that Asian operators are early adopters and open to new technologies that can accelerate growth and lower their cost,” said Susan this week. A lot of initial engagement is around cost-cutting.

DriveNets first big announced sale was to AT&T in 2020 as we noted in this IEEE Techblog post.  DriveNets disaggregated core routing solution has been deployed over AT&T’s IP-MPLS backbone network.  AT&T recently said that it plans to have 50 per cent of its core backbone traffic running on white box switches and open hardware by the end of 2022.

“DriveNets has demonstrated its ability to move the networking industry forward and has gained the trust of tier-1 operators,” said Adam Fisher, Partner at Bessemer Venture Partners. “While other solution providers are facing challenging headwinds, DriveNets continues to innovate and execute on its vision to change the future of the networking market.”

“DriveNets has already made a big impact in the high-scale networking industry and its routing solutions are adopted by tier-1 operators for their quality and the innovation they enable,” said Aaron Mankovski, Managing Partner at Pitango. “This investment will allow DriveNets to expand its footprint in the market and develop additional offerings.”

DriveNet’s claim to fame is that it can replace costly core router hardware with its proprietary sophisticated operating system which runs on cheaper “white box” equipment that resides in the service provider’s own cloud resident data center. That works out to a cost savings on average of 40%, Susan previously told Tech Crunch.

The operating system has a lot of different functionality, covering core, aggregation, peering, cable, data center interconnection, edge computing and cloud services, and this means, Susan said, that while customers come for the discounts, they stay for the services, “since our model is software-based we enable faster innovation and service rollout.”

Since its last funding round in 2021, DriveNets has gained significant market traction:

  • Growing network traffic running on the DriveNets’ Network Cloud solution by 1,000 percent
  • Engaging with nearly 100 customers and doubled bookings year over year
  • Establishing key strategic partnerships to speed up the deployment of next-generation networks worldwide, including agreements with Itochu Techno-Solutions Corporation (CTC)EPS GlobalWipro Limited, and KGPCo.
  • Growing its overall employee base by 30 percent, significantly expanding its operations and deployment teams, and its global reach.

“During the COVID-19 pandemic they grew their existing networks based by simply buying more of the same to minimize the operational burden,” said Susan. That’s now changing, though, in the current economic climate.

“Now, post pandemic they are starting to refresh these networks and with the growing interest of Cloud Hyperscalers in networking service, operators are looking at more innovative ways to stay competitive and accelerate innovation, by building networks in more like cloud. These are the big customers that we are seeing now — transformative large operators who are expanding the capacity of their networks and are looking to rollout newer services at a wide scale,” he said.

“We have seen in the past couple of years some of the incumbent networking vendors starting to adopt our model,” said Susan. He credits the company’s “huge success” at AT&T as a proof that “the model works. You can build networks like cloud at a very high scale and reliability and both lower network cost and accelerate service rollout.”

“Now it is not a matter of ‘if’ but of ‘when’ since incumbent vendors have more to lose over that transition,” he added. He believes that DriveNets will emerge a leader in the networking vendor space nonetheless, not least due to being able to invest in further development on the back of funding rounds like this one.

“We are investing in our current solution to ensure that we keep ahead of the market but also continue to add expected capabilities,” said Susan. He notes that the company was the first to support Broadcom’s latest chipset and more than triple the network capacity but also lead the transition to 400Gig. “In parallel, we are already investing in additional solution offerings that will provide additional value to our customers and expand our TAM,” he said.

“DriveNets has already made a big impact in the high-scale networking industry and its routing solutions are adopted by tier-1 operators for their quality and the innovation they enable,” said Aaron Mankovski, managing partner at Pitango, in a statement. “This investment will allow DriveNets to expand its footprint in the market and develop additional offerings.”

The biggest challenge is not technological, per se, but one of talent, “recruiting quality people to support our engineering efforts and our global expansion. At the end of the day, it is all about the people,” Susan explained. The company has been recruiting software engineers to fuel its growth.  DriveNets also recently announced the addition of three cloud and networking industry veterans to its leadership team.

However, there are still a lot of skeptics as LightCounting pointed out in this IEEE Techblog post.  LightCounting’s research indicates that “the overall Disaggregated Open Router (DOR) market remains incipient and unless proof of concept (PoC), testing and validation accelerate, volumes will take some time to materialize.”

About DriveNets:

DriveNets is a leader in cloud-native networking software and network disaggregation solutions. Founded in 2015 and based in Israel, DriveNets offers communications service providers (CSPs) and cloud providers a radical new way to build networks, substantially growing their profitability by changing their technological and economic models. DriveNets’ solution – Network Cloud – adapts the architectural model of cloud to telco-grade networking. Network Cloud is a cloud-native software that runs over a shared physical infrastructure of standard white-boxes, radically simplifying the network’s operations, offering telco-scale performance and elasticity at a much lower cost.

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DriveNets connects with $262M as demand booms for its cloud-based alternative to network routers

AT&T Deploys Dis-Aggregated Core Router White Box with DriveNets Network Cloud software

Light Counting: Large majority of CSPs remain skeptical about Disaggregated Open Routers

AT&T approaches mid-point in white box switch rollout