Managing Director, Sumant Mandal and Nokeena Networks featured at TheDeal.com

August 5, 2008
Nokeena lands $8.7M

TheDeal.com

by Mary Kathleen Flynn Posted 04:33 EST, 5, Aug 2008

Born as a technological puzzle, Nokeena Networks Inc. has raised its first round of venture capital to commercialize technology that it says will help solve the problem of how to better deliver and store online video.

The Santa Clara, Calif., startup, which until now has remained under the radar, has raised $8.7 million in a Series A round led by Clearstone Venture Partners and Trinity Ventures, said Sumant Mandal, a managing director with Clearstone. “Nokeena’s video delivery system is going to change the cost curve for most video publishers, especially as high-definition video comes online,” Mandal said.

He and Trinity’s Fred Wang will join Nokeena’s board of directors.

Nokeena evolved out of conversations Mandal had with company co-founder Prabakar Sundarrajan about the challenges of delivering high-quality online video.

“We got to brainstorming on the next big problem to be solved,” recalled Sundarrajan, who developed Nokeena with company CEO Rajan Raghavan, another entrepreneur. “The light bulb went off on the oncoming tsunami of high-quality Web video. That was the genesis of Nokeena.”

Such methods typifies Mandal’s approach to innovation, said entrepreneurs who have worked with him. Specifically, he seeks to identify an inefficient business process or related factor that technology can improve. He then asks a trusted entrepreneur to come up with a solution to the puzzle. If the answer looks promising, they start a company.

Although such methods are certainly not unique, and indeed would be familiar to any business school graduate, Mandal, who joined Clearstone in 2000, brings a special talent for refining ideas into companies.

Frank Addante, founder of the Rubicon Project, a startup that helps Web sites optimize unsold advertising space and that has raised $21 million from Clearstone and other VC firms, said the idea for his company emerged from a casual conversation he had with Mandal after bumping into the VC while jogging by his house one day in the spring of 2007. “What’s fascinating is that after every meeting with Sumant I always feel smarter — not because of what he tells me but because of what he asks me,” Addante said.

Clearstone is a good fit for Mandal, 39, who continues to focus on incubation or “co-creation,” as he calls it. The firm, which invests in a range of early-stage software, Internet, telecommunications and other companies, was formed in 1997 as Idealab Capital Partners, the venture capital arm of technology incubator Idealab Inc. Idealab Capital Partners is known for backing PayPal Inc., which eBay Inc. bought for $1.4 billion in 2002, and NetZero, now owned by United Online Inc., among other investments. Today Clearstone is on its third fund and has offices in Santa Monica, Calif., Menlo Park, Calif., and Mumbai.

Mandal’s predilection for building companies from their earliest conceptual phases naturally has led him to seek out ike-minded entrepreneurs with startup experience. Sundarrajan, for example, helped launch another Clearstone portfolio company called Mimosa Systems Inc., which makes archiving software for large companies and which has raised $51.5 million in venture capital. Sundarrajan also served as an adviser on another Clearstone startup, DiVitas Networks, which makes handsets that link cellular and wide-area networks and which has raised $23 million.

Previously, Sundarrajan was chief technology officer at NetScaler, whose technology helped provide business software applications over the Internet and which was acquired by Citrix Systems Inc. in 2005 for $325 million. He also formerly was senior vice president at Exodus Communications Inc., an Internet service provider that once had a market valuation of $30 billion before going bankrupt in 2001 during the dot-com crash.

“My experience with both Exodus Communications and NetScaler were central to the conversation Sumant and I had on Web video delivery,” Sundarrajan said. “Sumant recognized the huge opportunity and indicated that the time was ripe to be bold and incubate a venture focused on solving the challenge of large-scale delivery of high-quality Web video.”

The main problem with online video when Nokeena was getting off the ground was that the viewing experience was poor, with pieces often appearing choppy and stopping and starting. Other issues with online video included difficulty scaling up to offer masses of content and incompatible platforms, while as a business endeavor it was proving difficult to make money.

“It is clear that if this trend continued without a suitable solution, Web video delivery growth would stall and viewers would turn away in droves,” Sundarrajan said. Nokeena’s solution to such problems consists of high-speed video processing and network optimization technology that eliminates video stutters by monitoring congestion on the network and adjusting video transmission accordingly. Angel investors in the company include B.V. Jagadeesh, CEO of virtualization software maker 3Leaf Systems (who also was co-founder of Exodus and CEO of NetScaler); Raj Singh, managing director of Redwood Venture Partners; and Rajeev Motwani, a Stanford University computer science professor who was an early backer of Google Inc.

Nokeena plans to launch its first commercial product next year. As for customers, the company initially will target large content delivery networks, video content aggregators, original video providers and media companies.

As for Mandal, it remains to be seen if his hands-on style to building companies, which has yet to yield any exits, will pay off. But the entrepreneurs he and Clearstone support express confidence that they are on the right path.

“We were two guys with three PowerPoint slides when Sumant and Clearstone found us,” said Mimosa co-founder and chief executive T.M. Ravi. “They helped us flesh out the idea and, more importantly, validate the idea with about 70 customers. They introduced us to the majority of those customers.”