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The sun probably never shone brighter for Sandvine Corp. than on the morning of July 6, 2007. Shares in the provider of Internet networks had shot up more than 200 per cent since the beginning of the year, hitting an all-time high since its listing on the TSX in October, 2006.
The latest tech wonder out of Waterloo, Ont., had reported year-over-year revenue growth of 171 per cent and raised its guidance for future quarters. If the five company founders were taking a little time out to reflect on a wild ride, it was well deserved.
Sandvine has grown so quickly - 42,120 per cent over the past five years - that it tops the 2007 Deloitte Technology Fast 50, a list of the 50 fastest-growing Canadian technology companies.
Like the now legendary Research in Motion and other successful tech startups, the Sandvine story was born in the classrooms and corridors of the University of Waterloo in the late 1980s and early '90s - there and at the local Hewlett-Packard division where all the participants worked between their studies.
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Brad Siim, today Sandvine's chief operating officer and vice-president of engineering, and Marc Morin, the company's chief technology officer, teamed up with two other partners to market a plan to develop hardware and software that could distribute and manage video over the Internet. The idea is commonplace now, but it was revolutionary back in 1996.
They formed a company called PixStream and pitched their idea to potential financiers, eventually raising $57-million from the Business Development Bank of Canada (BDC) and venture capitalists Celtic House International (whose president, Andrew Waitman, was a former UW classmate), VenGrowth Capital and J.L. Albright Venture Partners.
To get things rolling on the business side, PixStream signed up Dave Caputo, now Sandvine's president and CEO, to head marketing, and Tom Donnelly, now Sandvine's executive vice-president of marketing and sales, to take care of PixStream's sales department. The fifth Sandvine co-founder and former UW classmate Don Bowman also joined the PixStream engineering team, completing the circle.
"I'd always believed good people attract good people and good teams self-select," says Mr. Caputo.
When Mr. Donnelly joined PixStream he came with a global client list that included Bell Canada, Telecom Ireland and Cisco Systems. Mr. Bowman, who once managed the video networking unit at Cisco, helped seal PixStream's relationship with the Silicon Valley tech giant.
The Cisco connection opened the door for what would become every small business owner's dream-come-true. In 2000, after three years in business, PixStream was purchased by Cisco for a whopping $545-million.
Things didn't work out so well for the 156 employees, however, who were put out of work when Cisco shut down PixStream just four months after the purchase.
With the Waterloo tech community still reeling in the midst of a severe industry downturn, the group of five swung into action. "Twelve hours later we started Sandvine," says Mr. Caputo.
Cisco would soon make video streaming technology commonplace, so Sandvine reinvented itself using the PixStream strategy - find an underserved area of the market, develop and produce the technology, and market like crazy. As the popularity of broadband Internet service mushroomed, the new company found a growing demand for security and traffic management solutions from telecom and cable companies offering high-speed Internet access.
Sandvine's technology basically redistributes bandwidth to where it is needed depending on the demands on the system at any point (such as voice over Internet protocol, gaming or video streaming).
Sandvine cobbled together 30 investors with "anywhere from thousands to millions of dollars," including $19.5-million from the original PixStream backers BDC, Celtic House and Vengrowth. Waterloo-based Tech Capital Partners also took a share (PixStream's former chief financial officer Tim Jackson was Tech Capital's managing partner).
"I wouldn't say it was a walk in the park but it helped to have a good track record," says Mr. Caputo.
Sandvine opened for business in October 2001 with 40 employees, most of them former PixStream workers. The founders chose to stay in the Waterloo region to maintain ties with the university and its pool of talented young engineers. The company soon found its niche in providing security and traffic management solutions to telecom and cable companies offering high-speed Internet access.
Reinvesting in the new company was an easy decision, says Glenn Egan, managing director for venture capital with BDC. He credits the Sandvine team with not making a common startup mistake: focusing too much on technology and too little on profit. "They built the company well and they built the product well ... investors invest in people who build a product," he says.
Sandvine also has a knack for finding underserved markets, Mr. Egan says. The number of high-speed Internet connections worldwide is expected to increase by 30 per cent a year beyond the estimated 250 million already established, according to CIBC World Markets.
Eventually Sandvine built a client base of more than 80 major customers around the world. To finance its rapid expansion the company went public on London's AIM Exchange in early 2006 with the help of Celtic House founder and technology guru Sir Terence Matthews. That fall, Sandvine made its debut on the Toronto Stock Exchange.
The company's founders have never regretted the decision to surrender some control by going public, Mr. Caputo says. "I don't see the downside. It gives us the opportunity to take it to the next level."
No matter what the future holds for Sandvine, Mr. Caputo says he will always maintain close ties with UW. Although he didn't attend the school himself, all five co-founders regard it as a brain trust and have remained true to their school. "The University of Waterloo is a very aspirational and inspirational institution."
Dale Jackson is a producer at Business News Network.
