Monday, January 14, 2008

Funding, new customers bring Starbak out of the dark

By Efrain Viscarolasaga

After the original investors in Starbak Communications Inc. pulled out in 2006, the Newton-based enterprise video platform maker scaled back its operations to six employees -- and turned inward to regroup.

The company is now re-emerging with a major customer win and another on the way, say executives of Starbak, which was sold last year to investment firm Gulfstream Group LLC of Lexington.

Dow Chemical Inc. has signed on with Starbak, through an affiliation with IBM Global Services, to deploy the company's live and on-demand Internet protocol (IP) video platform in 30 of the company's sites on three continents. Company executives say the deployment is expected to expand to another 100 sites over the next several months.

CEO Gregory Casale declined to place a dollar value on the contract, but said he expects to close deals with more new customers in the coming months.

Starbak's journey from growth company to the "whatever happened to them?" pile and back has been difficult for Casale and his team, but it validates the company's product strategy, he said.

"We ended 2006 with one of the best sales years in the history of the company, and that was amazing," he said. "It's not something I want to go through again, but it has been extremely rewarding to see the customers come roaring back."

Gulfstream invested $1.5 million in Starbak following its 2007 acquisition of the six-person firm to help to keep operations running, but Casale said he expects a more substantial round of funding sometime this year.

Founded in Columbus, Ohio, in 2000, Starbak became part of the local tech community after its 2003 acquisition of Vividon Inc. The company grew to 55 people in 2005, and managed to land a few customers as early adopters, including Virginia-Mason Medical Center in Seattle and the Suffolk County Courthouse in Boston.

But executives were also distracted by a patent infringement lawsuit Starbak brought against Norwegian videoconferencing company Tandberg ASA, a Starbak partner. The suit was eventually settled out of court for an undisclosed amount, but it took its toll on the company, said Casale.

As a result, initial investors Atlas Ventures, Carlyle Venture Partners and Venrock Associates pulled out.

"By the time we got through all the lean times and things started going well, investors were already five or six years in and that's a hard position for them," said Casale.

But the company's self-imposed dark period may have been for the best. Three years ago, IP video was struggling in the enterprise. Now the technology could be on the verge of mass penetration for applications such as employee training, CEO addresses and video communications, according to Steve Duplessie, a senior analyst at Enterprise Strategy Group in Milford.

"The (video) capabilities are far beyond what they were three or four years ago, be it broadband video, steaming or video on demand," he said. "Now I don't think you're going to find anyone in the Fortune 1,000 that doesn't have some kind of IP video in use, but it's still nowhere near what it will be."