PacketExchange Grabs $12 Million Investment... And CEO

Rick Mace has taken three different startups through various stages of funding. By taking the reins at PacketExchange and a new infusion of cash, he's hoping to catch the eye of content providers and companies that want to bypass the public Internet."The real story behind the announcement is that we have a great customer base and a series of services that work," Mace said in an interview. "This company is positioned early and its associated markets are evolving."

Last week, the company said it closed $12 million in Series B funding. The round was led by existing investors DFJ Esprit, Draper Fisher Jurvetson's exclusive venture capital partner in Europe, and Bank of Scotland Growth Equity, part of the HBOS Group. The company also hired Mace, a 30-year tech-industry veteran who was last seen as chief operating officer of Tekelec. That assignment was facilitated through the sale of Steleus Group, where he served as CEO and chairman and engineered the group's eventual acquisition. The purpose for the investment is threefold: to grow its customer base; to support OSS and BSS for customers; and to build out its network infrastructure.

Mace was brought on board -- in his words -- to move Packet Exchange "from a transit service to a value-add application sensitive network company for content and private exchanges."

"The general-purpose Internet is congested as the content increases, and it's meeting a traffic surge," he said, noting that other bandwidth hogs like software as a service (SaaS), VoIP, and social networking sites are also gumming up the works.

PacketExchange's remedy is to create a specialized virtual network. It's already done so for more than 450 customers, including Microsoft and Yahoo, and has a strong relationship between Europe and the United States. The goal for 2008, according to Mace, is to strengthen its presence in the Americas.

"We see a growth in businesses driven by security and requirement for deterministic results," Mace said.

Though PacketExchange has some overlap to other co-location and IP transit service vendors, Mace said his company should be seen more as a complement than a competition.

"The space in which we operate is between the transit and the nonvalue with added transit," he said. "We resell content delivery, so there might be some overlap. But we also work with some of our competition ... and they use our services as well."

While it seems to have its positives with the current iteration of the Internet, PacketExchange may have a real boost to its services if the so-called net neutrality issue fizzles. Mace said that a multitier Internet service model would be a boon to its delivery model, which favors content providers and high-bandwidth users.