Update: This post I tweeted and highlighted the fact that AT&T and Apple had “signal bar” issues. See the section below

In this new networking paradigm or Infrastructure 2.0 market (smart networks) the trend as highlighted by Apple iPhone and Google Android is putting massive pressure on service providers to deliver capacity and growth in their networks. Just look at all the complaints AT&T gets around the iPhone. It’s common knowledge that AT&T is manipulating the coverage signal “bars” to give the impression that there is more coverage then they really have.

Small focus or what I call “purpose built venture funds” are very hot.  We are seeing this in the market with Kleiner Perkins adding $200 million for an iPad fund and with angel investors like Mike Maples doing super early stage or super angel funds.  What all this means is that the iPad and new applications will spur a new renaissance in software and in networking

I spoke with Luis Avila-Marco Juniper’s Senior Vice President of Strategy and Corporate Development and is responsible for leading corporate strategy, mergers and acquisitions, as well as the development of key strategic relationships.  I wanted to get some insight from Luis into what, why, and how Juniper will be investing in startups.

Juniper Networks announced in February their $50 million dollar venture fund to identify innovative startups that revolve around some of the new markets.

Juniper has been investing in the past but mostly it hasn’t been aligned with their strategy around this notion of a “New Network”.  Now Juniper’s business and product strategy is aligned with a special venture fund to get cash to promising startups innovating.  The core strategy of the fund is to build an open scalable ecosystem of startups that solves problems, creates innovation, and is developer focused all based upon Juniper’s new open networking platform or network operating system.  The results Juniper hopes will create value for the customers, startups,  and for the ecosystem as a whole.  The more people they get the more network effect they get.

I really like their approach and I think this will be well received by existing venture capitalists who now have more prospects to syndicate their B rounds.  Series B rounds of financing are often very difficult for these big technology opportunities.  Juniper is willing to step up to the plate and have just recently done a deal to fund the Series B of Altor which was funded by Accel Partners and Foundation Capital.

According to Juniper’s web site on their investment fund, they detail their focus.

Investing in leaders in our target segments, paying particular attention to technology, intellectual property, and management strength. While we will consider investments at any stage, the majority of our investments are early- and growth-stage venture-backed companies.

Our initial investments vary in size, and we participate in follow-on rounds as appropriate. We co-invest with other leading funds and strategic investors, and also act as lead investor for some of our investments.

Target Segments
The Junos Innovation Fund invests in leaders in networking technology and applications, with a focus on the following segments:

Junos Space, Pulse, and SDK platform
Security
Mobility
Video
Virtualization
Network automation
Optical technology
Green networking

Juniper Platform Now Tied To Their Venture Investments
Juniper’s investment strategy is aligned with their business and product strategy.  They want to reach out to startups who are developing innovative technology, products, and companies. Many startups are seeing what Apple and Google are doing as lifting the market on the consumer and enterprise markets. Juniper is touting this trend as a “New Network”.

In this new networking paradigm or Infrastructure 2.0 market (smart networks) the trend as highlighted by Apple iPhone and Google Android is putting massive pressure on service providers to deliver capacity and growth in their networks. Just look at all the complaints AT&T gets around the iPhone. It’s common knowledge that AT&T is manipulating the coverage signal “bars” to give the impression that there is more coverage then they really have.

The market wants more and the providers have to deliver. This is a real issue for providers to meet the demand of the market.  Plus the mobile market is very hot for Service Providers.

Types of Startups Juniper Is Looking For

Juniper outlined three types of companies that they are looking at.  They are:

1.  Potential Acquisitions

Companies doing innovation in the focus areas that is outside their roadmap and might be technology plays for Juniper to acquire.  Most likely these are companies that are pursuing projects that are “contrarian” to existing product plans at Juniper.

2.  Stand Alone Revenue Generating Companies

Companies that can generate revenue with a relationship with Juniper that would be part of their Juniper ecosystem.  This is their “app store” model.  Most likely these companies wouldn’t be acquisition candidates but instead independent companies that built on top of Juniper to add value.

3. Integrated Business Model, Technology and Product Companies

Companies that build on Juniper’s platform that leverage capabilities from Juniper like access to customers, and technology.  These companies would be integrated into Juniper’s business model either at technology, product, or sales level.  This type of investment might be standalone and participate in Juniper’s ecosystem or be acquired.

This plan makes sense given the current trends in the venture, enterpreneural, and key enterprise and mobile markets.

Convergence Trend Is Relevant To Juniper And Startups

According to Computerworld it is being reported that the Junos, Space, and Pulse network application platform will be an open mobile core network for third-party developers and the operators themselves, so they can develop and run their own applications, The products and platform are expected to ship soon this year.

There was some article recently that said no one can challenge Cisco. I think that fundamentally an open strategy can be a “judo like” strategy for a Juniper and others to take down Cisco. If Cisco underestimates the convergence and pushes it’s same old agenda of one vendor at all costs (when the world is going multi-vendor) then they could get tossed in key markets.  Focusing on developers and investing in the community is a differentiator for Juniper.

Early Success For Juniper Venture Fund

Since announcing the fund, Juniper has invested in two companies with over 100 inbound leads from entrepreneurs. They will behave similar to a traditional venture capitalist and will lead a deal if appropriate. However, in most cases Luis mentioned that they will most likely follow.

Most deals attractive to Juniper will most likely be invested in by a Tier-1 venture capitalist. For example their most recent deal Altro was a Series B which was initially invested in by Accel and Foundation Capital.  Juniper expects to invest in about 5-10 companies a year.

How it works
In terms with the relationship with Juniper entrepreneurs should be looking for value add by Juniper. Focus areas for startups include market validation, access to core technology like Juniper’s routing engine, access to Juniper’s customers to create a return for the startup’s value proposition. Startups should not have to reinvent the wheel says Luis.  This is not a pure finanical return focus for Juniper (in the classic venture sense).  It’s about strategic value to Juniper’s customers and generating revenue for the startups.  It’s about time to market for innovative technologies, products, and services that Juniper can enable.

The opportunity for startups is the consumerization of the network. This trend is putting pressure up and down the stack for more performance, software updates, security, and intelligence. This paradigm is changing the face of networking and the products required to support high performance, open, and dynamic networks.

This new venture fund is really about establishing and nurturing an ecosystem of innovation around the core Juniper platform. Recently Juniper has put a strategy in place that is open and developer focused with software at the core of Juniper’s strategy.

Juniper Puts Money Where’s It’s Mouth Is On Being Open

Networking gear has evolved so damn fast that everything is in essence “carrier grade”, and the real action is at the high end.  At the high end we are seeing more improvement which Juniper announced big time improvements last week.  The great news is that companies can take advantage of those advances with the open software.  Customers, developers, and startups are all innovating on software. Software is the key. Google knows this and so does the entire open source movement.

At the end of the day this war will be won or lost on the ecosystem play.  Ecosystems of successful developers and partners have proven in the past and today that they can win the battle. Juniper is really showing that they understand this. They have product leadership on the “gear” or “box” side and now they are showing some “teeth” with a dedicated Junos software business group.  Opening it up is the key for Juniper – this s a “judo move” for them against Cisco.

As I’ve said in previous posts here, here, and here on SiliconAngle, Juniper is smart they are using software to innovate on their product leadership. It’s not the box anymore, but the brains in them – software.

Juniper’s Investment = New Network

Back in November Juniper placed their vision for the New Network of which there were four major changes:

1. Junos software as a “New Network” Operating System.
This is the Junos network operating system, the new Junos Space network application platform and new Junos Pulse integrated network client.

2. Junos silicon and system software for faster performance
It’s the new Junos One family of processors, including the Junos Trio chipset with 3D Scaling technology. Junos Trio will be delivered in new modular line cards and new 3.5-inch routers for Juniper MX Series.

3. Cloud Ready – it’s mainly Junos extended in the cloud – security and provisioning – It’s very datacenter focused which is not surprising. I’m digging into this further.

4. Open partnering ecosystem around Junos – kicked off with Dell and IBM and series of other companies and startups.

New Developer Model Is Open Not Closed – Juniper Gets It

What I find interesting is the Juniper model is open.  It’s an open software approach – or what they call a programmable Junos. This is an open cross-network software platform (based on Junos) that allows developers and Juniper customers to directly program multiple layers of their networks for rich user experiences. This is a direct threat to Cisco IOS.

New “Cloud-Ready Data Center” solutions and security products that enable enterprises to simplify network infrastructures. This is targeting an extended cloud model for datacenters with security at the core of the offering. Details are not fully explained but it’s around on demand provisioning (as best as I can tell at this point).

Industry analysts have been commenting recently that Juniper is too small to acquire growth and to big to be acquired. So this move today by Kevin and his team is an “all in” bet. The main target is Cisco. This will be a battle of competitive strategy.

This isn’t something Juniper just woke up and realized. It’s been a multi-year process centered around innovation and product excellence. Juniper is making the bet that the strategy of product leadership, openness, and software will ultimately win the day.

Value Add For Startups – Show Me The Validation and Money

Juniper expects to fund companies that they can acquire.  For startups not only is Juniper offering technology and validation, but also the ability to generate revenue.  Juniper plans that in three years their funded startups will be generating hundreds of millions of dollars in revenue.  Juniper expects to hear from startup two ways:  1) through introductions via industry sources and networking, and 2) via their web site (here is the site link).

Funding, validation, community ecosystem, and moneitiztion – that’s a killer combination.

Difference Between Juniper and Cisco

Given Juniper’s recent credible track record of announcements and now this move into funding open innovative startups highlights the difference between Juniper and Cisco.  Cisco is a top down controlling PR driven company and Juniper is bottom up, organic, collaborative, and innovative and open company.

If Juniper keeps this trend going of delivering and being open the developers will flock to Juniper over Cisco.  As developers flock to Juniper over Cisco these new developers might just disrupt (and displace) Cisco’s proprietary end to end network ownership model they are pushing.

We’ll all be watching.