On August 31, 2001 – eleven days before 9/11 and fresh on the heels of dot-bom; Sandvine Inc. opened its doors for business. They had no product, no business plan, and the entire staff was hung over. We’d had a little BBQ the night before to kick things off, says Dave Caputo, President and CEO of Sandvine. “It may have been 10 or 11 a.m. before anyone made it in to work.”

The 30 people that did show up for work may have been bleary-eyed, but their long-term vision was crystal clear: create a winning product and a successful company.

“We just said, Here’s a group of smart people. We don’t know what we’re going to do but we need money. And we got it,” recalls Siim, Sandvine’s COO and vice-president of engineering.

Sandvine’s genesis is rare if not unique among Canadian startups – a talented collection of people with a track record of success brought together to invent a commercial product.

In 2001, even major companies with sexy product suites and established clientele were having trouble raising capital. But Caputo, Brad Siim and a handful of other dot-com survivors had something a lot of the “old school” dot-com-ers didn’t have.

Each other.

“It probably helped that we were all coming from good places,” says Caputo.

That investors had faith in Sandvine’s team is evident in the $19.5 million in startup money they were able to raise in the middle of an investment dark age.

SANDVINE‘S TECH PEDIGREE
Sandvine was founded by the same management team that had founded Pixstream in 1997 and sold it to Cisco for more than half-a-billion. A few months after the deal was done, the dot-com bubble burst and Cisco had its first quarterly loss in company history. Seemingly moments later, the Pixstream operating unit was shut down.

Dave Caputo, Sandvine Co-Founder and CEO

So, Sandvine’s founders reached out to their peers in the tech world and secured commitments from about 30 people with several hundred years of collective experience and success between them.

“Getting the money was pretty easy after that,” says Caputo. “These people had made a lot of money for a lot of people, so investors were amenable to keeping the team together.”

MARKET ANALYSIS AND PRODUCT MANAGEMENT 101
Sandvine’s success is a case study in analyzing an emerging market and building a product to capitalize on it. Because there was no product the core team was able to operate exclusively in the realm of opportunity.

“We split everyone into four teams and asked each time to focus on a potential product area,” says Caputo. “They spoke to industry analysts, engineers, customers, other founders . . . really, they just got out there and dug around.”

The teams gathered once a week to exchange findings and zero-in on opportunities. Everyone learned from what everyone else was doing and ideas pulled forward from one area began to feed in to another. Eventually, one course of inquiry was discarded and the four teams became three.

“And then there were two, and then there was one and that team became Sandvine,” says Caputo.

A SOLUTION FOR BROADBAND PROVIDERS
Today, Sandvine’s solution puts an intelligence layer across the networks of broadband Internet providers, helping them identify bottlenecks, improve efficiency and apply actions and policies to traffic management.

“User experience goes up, operating costs go down, the network is more secure, and there’s a better opportunity for the ISP to deliver services the consumer actually wants,” says Caputo.

Sandvine thinks there is a better and more profitable way for broadband providers to manage and scale their services: stop worrying about building out what you have and focus on delivering a quality user experience.

“Multimedia downloads and such create big network packets,” says Caputo. “Users don’t want to know what it takes to deliver them to their desktop or what-have-you. they just want to watch a video or play an online game that’s smooth and doesn’t freeze up on them.”

Full screen shot here

“The typical approach [for broadband providers] is to throw more bandwidth at it,” says Caputo. “But the problem isn’t about having a big enough channel to deliver through. It’s about optimizing packet delivery in a way that gels with user preference and experience.”

Sandvine makes existing networks more efficient, reducing build-out expenses. According to Caputo, that means lower capital equipment costs, more intelligent traffic management and – key to the future of broadband service providers – superior customer retention.

“People don’t really switch broadband providers much yet,” says Siim. “The mentality is that a broadband connection is a fragile thing and people are kind of afraid to touch it.”

Think: circa mid 1990’s when the long distance market de-regulated. At first, consumers were hesitant to make a change. But within a matter of a few years, billions of dollars in consumer services shifted hands.

“The highest correlation to profitability in the consumer facing portion of the tech world is churn,” says Caputo. “I’m here to tell you that pretty soon broadband is going to be no more complex to the consumer than any plug and play function. When that happens, the quality of experience is going to be the biggest driver of customer churn.”

“People’s kids are going to go to them and say, ‘Hey, all my friends have way better connections to play Halo 2 . . . you pay for the change and I’ll take care of hooking up the little box.’”

THE PAYOFF

Brad Siim, Co-Founder, COO, VP-Eng, Sandvine

Almost the entire original group of 30 is still with the company and Sandvine now employs nearly 200 people. In April of 2007, Canadian Business Magazine named Sandvine as one of the Top-50 Great Places to Work in Canada, recognizing the company’s unique approach to building a fun and productive environment for employees.

It might have been luck, or the benefit of good historical relationships with investors that helped get the company rolling, but it is unquestionably the culture of Sandvine that continues to define the company today.

“I don’t know that it would be possible to replicate a lot of what we did when the company was first started,” says Caputo. “The investment market isn’t all that friendly to the idea of simply putting money into people.”

But, six years and a complete re-shifting of the technology investment market later, “The Sandvine Way” – as unique as the company’s story may be – seems to have worked.

“It’s not that hard,” says Siim. “Hire intelligent, creative, kickass people. You shouldn’t care about what language they know or whether you have a position that’s right for them.”

“Get a team together and the rest will play itself out.”