As more individuals and organizations utilize the internet for their daily activities, service providers face increasing challenges in scaling their infrastructure quickly and dependably to accommodate the growing demand.

A startup has developed an innovative, software-driven approach to network expansion, eliminating the need for expensive hardware upgrades, and is now announcing a substantial funding round following significant business growth.

DriveNets – a company offering software-based routing solutions to service providers, deployed as virtualized services on standard “white box” hardware – has secured $208 million in Series B funding, resulting in a post-money valuation exceeding $1 billion.

These funds will be allocated to further international expansion and adaptation of the technology to a wider range of applications, extending beyond traditional telecommunications carriers to include large media streaming companies and others with direct network control.

CEO Ido Susan indicated that upcoming agreements are currently confidential, but emphasized a clear market need: “To deliver bandwidth with minimal delay, to enable robust 5G capabilities or cloud gaming experiences, proximity to the end user is essential.”

The Series B round is led by D1 Capital Partners. Existing investors Bessemer Venture Partners and Pitango (who co-led DriveNets’ previous $110 million funding round upon the company’s initial launch) also contributed significantly, alongside participation from Atreides Management. This latest valuation represents more than a doubling of DriveNets’ value in 2019.

D1 Capital Partners has been a highly active investor recently, focusing on businesses benefiting from the conditions created by the pandemic, including Warby Parker, Instacart, TransferWise, Unity, Cazoo, and Bolt.

DriveNets’ significant funding round reflects both broader market trends and the company’s own proven success.

Prior to this funding, DriveNets had already established AT&T as a customer, a strong endorsement of its virtual network technology; however, recent events and the surge in internet usage have prompted additional providers to explore its solutions.

“Even before the onset of Covid-19, internet traffic was increasing by 30%-40% annually,” stated Susan. “Yet, just five years ago, established carriers questioned the viability of virtual networks. Now, the question isn’t if they work, but when they will be implemented.”

He reported that the company is currently experiencing strong sales momentum. “With more people working and learning remotely, the demand for increased network capacity and bandwidth is substantial,” he explained.

DriveNets’ primary offering is a more adaptable and economical alternative to conventional network routers, utilizing a virtualized architecture. Traditionally, routers have been sold as integrated hardware and software packages, dominated by companies like Cisco and Juniper Networks.

DriveNets, as envisioned by Susan and co-founder Hillel Kobrinsky, provides a solution based on generic white box hardware, currently sourced from three different providers, according to Susan.

These white boxes operate in conjunction with a system called Network Cloud, which runs a networking stack known as the DriveNets Operating System. Service providers manage their white box systems and servers through a virtualized service operating on Docker containers, leveraging open APIs for automated configuration and control of network services.

This approach provides greater flexibility in allocating capacity across the white box servers, and allows for easy addition or removal of hardware as needed. Essentially, it separates the software from the hardware, simplifying hardware expansion and enhancing software control.

(Notably, my discussion with Susan occurred via Zoom, with him situated in his home office, which also functions as a personal workshop. Surrounded by various hardware components, we discussed the growing dominance of software.)

This disruptive concept has the potential to challenge established players, but Adam Fisher, a partner at Bessemer, expressed confidence in its continued success.

“We have great confidence in this company,” he said. “Beyond the entrepreneurial skills of Ido and Hillel, we strongly believe in their vision. Network routing is transitioning to software and cloud-based architecture. We are addressing not just minor components, but the core functionality of the system. DriveNets is tackling the most challenging aspects. As one customer leads to many, it becomes clear that this is the future.”