PROFESSOR MANJUNATH HEGDE IS BACK TO teaching at the Washington University in St. Louis. Only a few weeks ago, he was the Chief Technology Officer at the $160 million Celox Networks, which was into developing carrier-class IP services delivery platform for the network service providers. On December 18, 2002, Celox shut its doors because of the protracted slump in telecom spending. The lone remaining page of the company's website says,“It had become increasingly clear that carrier CapEx spending would not return in the foreseeable future. As a result, we could not reasonably expect to execute on our business plan.”

Hegde, one of the five founders of Celox, says, “When the company was founded in 1999, carrier spending was still high. Right from day one we worked towards the system requirements, design and architecture of our dream switch.”

For Hegde and his team, raising the first round of funding wasn’t any easy. “The dot-coms were fairly well established. The service providers were becoming aggressive and competing with operating companies. We approached 10 to 15 VC firms and managed to get three VCs commit to us. We raised about $7 million in the first round,” recalls Hegde.

The startup grew aggressively thereafter. Headcount scaled to about 300 employees. It did everything that a successful firm would do—expanding to foriegn bases, like China, and recruiting key engineering talent. About 2000 Chinese engineers took up Celox’s admission tests and 50 of them were hired. The company lobbied and arranged H1B visa for these engineers and was successful in getting them to its headquarters in Southboro, MA. “We first went to Bangalore in 1999 and found that the Indian market had been 'farmed' by many U.S. and European companies. It wasn't easy to hire in India then,” laughs the Mangalore-native Hegde.

The company even made strategic decisions and outsourced some of its development work to Wipro, HCL and Microland. At one point there were about 180 engineers from these three companies working on the Celox project. State-of-the-art network processors that contained eight million gates and 20 boards with about 2000-4000 components were being developed at Wipro in Bangalore, HCL in Chennai and Celox's offices in St. Louis, MI. The initial success in developing a chip across three different locations indicated that it was possible to develop this kind of a chip in an offshore manner. “It does require a lot of discipline and a lot of time and energy in terms of managing the team,” says Hegde.