Cybera gets second VC round despite tech-wary environment By Roy Moore Nashville Business Journal July 5, 2002

Cybera Inc., which was started last year by a group of former BlueStar Communications officials, has closed on another round of funding that will be used to add equipment to its Atlanta facility and to hire additional staff.

Although officials wouldn't disclose the exact amount of the funding, Chairman, President and CEO Cliff Duffey says it is "substantially larger" than the $371,000 the company raised at its launch in 2001.

Instead of the typical institutional investor, the company raised the money from its founders as well as angel investors, including one each from Nashville and Atlanta.

"This is a bad climate for institutional investors in a lot of ways," Duffey says. "We found some individual investors who agreed with us, while there were few institutional investors who understood what we were doing."

Founded by Duffey, Chief Marketing Officer Jeff Good and Senior Vice President of operations Tom Spear, the Nashville-based company sells bandwidth bundled with virtual private networks to medium-sized businesses.

Similar to a frame relay, Cybera's SmartNetwork allows individuals at remote sites to tap into a company's private network -- such as bank branches connecting to the main office -- while providing firewall-protected access to the Internet. The only difference is Cybera provides the virtual router and virtual private network, making it more cost-effective for the user.

"For a lot of companies, it's not something that's important, but once you get into the financial services industry, you need it," says Patrick Keeble, vice president of corporate development.

And unlike a simple Internet-based network, the system offers better protection from hackers.

"In past years, the move has been to get all the people connected to the Internet," Duffey says. "Our approach is very different. We connect people without having to use the Internet. It's a level below the Internet."

So far, Cybera has signed up about 50 companies to its service, with connections for each client ranging from a few to nearly 400. Its clients include law firms, accounting firms and restaurants, all with multiple locations.

Although the company has been most active in California, Florida and New York, Cybera has provided its system to several Nashville-area companies.

One such company, Slam Digital Works, signed up for the service when Cybera launched. The developer of content for the Web had previously been using a DSL connection with BlueStar.

"The connection is good and the connection is clean, and when we something happens when the weather is bad, (Cybera) will call us up and tell us before we really even know (the problem) is there," says Jim Erdman, a partner at Slam Digital Works.

Unlike what happened at BlueStar, Cybera isn't actively pursuing additional venture funding. Instead, officials are spending their time developing the company's footprint in the Southeast. The recent funding round will go toward adding six to eight sales representatives for the area, while making Cybera's router housing facility in Atlanta redundant. Another facility will be added elsewhere in the country in the first half of next year.

"I think the most important things that we've learned from our time at BlueStar is ultimately we have to put a product out to our customer that meet their needs," Duffey says. "Our customers want a complete network solution, not a piece of the puzzle. We have to present a full business solution and that's very different from the carriers who are only in the business of selling only pipes."

BlueStar, which offered only pipes for Internet connectivity, was eventually bought by competitive local exchange carrier Covad Communications, but dissolved last summer.

Following this growth pattern, officials expect Cybera to become cash flow positive in the first half of next year.

©2002 American City Business Journals Inc.