Leading Arrcus's Series D
Arrcus is a hyperscale networking software company and a leader in core, edge, and multi-cloud network infrastructure
We at Prosperity7 led Arrcus’ $50 million Series D round in January 2023. Existing partners Clear Ventures, General Catalyst, Liberty Global and Lightspeed also participated. Arrcus saw its revenues grow 100% in the last year, and its post-money valuation is now at $400 million, double its $200 million valuation from its $28 million Series C in 2021. Arrcus has raised over $120 million to date. Why did we invest in Arrcus? Well…
Networking Requires a New Paradigm
Networking is the last frontier getting modernized as compute and storage has experienced. We have all seen compute evolve over the years from the days of mainframes to virtual machines with hypervisors which abstracted the software away from the hardware. Now, we live in the world of serverless compute (e.g., AWS Lambada and Kubernetes-orchestrated containers); these trends have created significant businesses like VMware and AWS.
The same was repeated for the storage market in the last 30 years from tape to Storage Area Network (SAN), and now to cloud-based object storage providers such as Amazon S3, Wasabi (a Prosperity7 Portfolio Company), Azure Blob Storage, Google Cloud Storage, and others.
Despite the significant progress made in cloud-enabled compute and storage, there is no true cloud-nativity in networking today as you see in compute and storage - Some may say this is by design.
The networking stack is still stuck in the old world where companies sell their hardware with their proprietary software at 60%+ Gross Margins since no vendor-agnostic abstraction layer has existed - and there in lies the opportunity for a company like Arrcus to disrupt the market!
But Re-architecting the Routing Stack is Extremely Difficult
Writing an entire routing stack from zero is an extremely challenging technical problem. Creating a routing stack is like writing the kernels for Microsoft Windows or compilers for Intel chips. It is a skillset less than a few hundred people on the planet posses, which serves as a significant barrier to entry. There haven’t been many startup success stories (yet) in this space, and this was not for a lack of trying - it’s just a very, very hard problem to solve! Cumulus network was a good attempt at Open-source Linux based software, which was eventually purchased by Nvidia.
With the world increasingly becoming hybrid multi-cloud, emergence of 5G (telco stack needs to be cloud-native and 5G infra needs to speak to networking infra) and move of data to the edge, a new networking paradigm is required. As you can imagine the TAM here would be significant given the global transport networking + network security TAM (including spend on ethernet switches and routers) is estimated to be between $70-100bn.
Enter Arrcus:
The secret sauce is the ArcOS platform, which acts as Microsoft Windows or MacOS for networking. It incorporates the routing stack, the protocol translation, and finally, the hardware abstraction, which hasn’t been done before in a silicon-agnostic manner. The OS works with two other important pieces of software. First is Arrcus Route Reflector (ARR), which is the brains of the platform for packet routing, and second is ArcIQ, which is the telemetry engine for real-time data collection. ArcOS + ARR + ArcIQ provides best-of-breed secured networking ready for tomorrow’s AI/LLM driven world.
Without Arrcus the engineering teams will still manually tune routers, they also can’t be vendor agnostic.
Arrcus it the Natural Partner for Telcos for Ongoing 5G Revolution
For the 5G transition, the ArcOS software understands complex 5G and Border Gateway Protocols (BGP), and can speak between telco infra and networking hardware to connect the 5G nodes to the overall IP network fabric, taking care of complex translations and routing to integrate a 5G network into your existing network.
Softbank has succeeded in deploying its Segment Routing over IPv6 Mobile User Plane (SRv6 MUP) technology to implement Multi-access Edge Computing (MEC) and network slicing affordably at scale using Arrcus technologies. Arrcus also built its Virtualized Distributed Routing (VDR) on its ACE platform in trials with investor & partner including Liberty Global. VDR transforms the monolithic router chassis into a distributed system that scan scale to thousands of 100G and 400G ports, allowing service providers to address the explosive bandwidth growth in an elastic build-as-you-grow model without worrying about limited or underutilized slots in a chassis.
Stellar Leadership & Investors
The Company leadership is best-in-class with visionary founders. Shekar Ayyar, the CEO, was the former EVP & GM of the Telco & Edge Cloud business at VMware. Keyur Patel, the founding CTO, was the founding engineer at Ipsilon Networks which was acquired by Cisco, then was a distinguished engineer at Cisco.
We are honored to invite alongside best-in-class investors including Lightspeed, General Catalyst, Clear Ventures, and others. The Company also boasts strategic investments from SoftBank, Samsung NEXT, and Liberty Global. We are also excited about the strategic partnership potential between Arrcus and the broader Aramco platform.
We are very excited about the partnership and what the future holds - onwards and upwards!
External Links
Press Coverage: VentureBeat, TechCrunch, SiliconAngle, Data Center Dynamics, SDX Central, FinSMEs, Fast Mode, TelecomTV, EdgeIR, and Converge Network Digest