YIPES lights the way - Company Operations

Communications News, May, 2001 by Richard R. Rogoski

CEO Jerry Patrick's bandwidth-on-demand dream leads a telecom revolution

The basic idea was simple: Tie all your computers together into an ethernet network, then use fiber-optic cable to connect your local area network (LAN) to another ethernet-based LAN. Not only would this network be faster than those using traditional asynchronous transfer mode (ATM) or synchronous optical network (SONET) architecture, but it also world be scalable--providing more or less bandwidth on demand.

In the early 1990s, such a network was still largely a dream in the minds of a few telecom visionaries, like Jerry Parrick. That this kind of network could even be connected to the Internet was considered more fantasy than dream. The advent of Gigabit Ethernet technology, however, made the dream possible--and Parrick was quick to capitalize on the idea.

As co-founder and CEO of San Francisco-based Yipes Communications Inc., Parrick, 54, is now waging a war against incumbent service providers, including the Baby Bells and CLECs, by being able to offer more bandwidth at a fraction of the cost most telcos charge for a T-1 or T-3 connection. The network's flexibility is what he stresses.

REALIZING THE DREAM

The groundwork for Yipes--founded in July 1999--was being laid while he still held key positions with Pacific Bell and US West. Between 1985 and 1989, Parrick served as Pac Bell's assistant vice president of new business development and then vice president of market assessment and planning. "I asked Bell to form a separate group called the Data Communications Group," he recalls. "I ran it. And it was the first data-oriented business unit in any telco."

As that group's vice president and general manager from 1989 to 1991, Parrick concentrated on selling data transport and LAN products to businesses. "Because of the adoption of LANs, there was also talk about multiprotocol-routed networks," he says. "This was the time when routers were hitting the market. So, I forged a partnership with a little company in San Jose called Cisco Systems to resell their equipment."

A jump to U S West in 1991 found Parrick becoming its vice president of marketing and sales for its new data networking business unit called !NTERPRISE Networking Services. Within three years, he became president of that unit. By the end of 1996, it had the third largest frame relay network in the U.S., with more than 40,000 working ports. Sales--hovering around $7 million in fiscal year 1992--leapt to $529 million by the close of fiscal year 1996, according to Parrick.

GETTING RESTLESS

Parrick's entrepreneurial spirit first took flight in 1968 when he started Vencer Inc.--a small consumer products company built around two patented inventions--but he was getting restless. Major changes were taking place in telecommunications, and he wanted to be at the forefront. "When you're in the product development domain, you ask yourself, `What's next?' There were white papers in the industry talking about a flat network which did not use all seven layers of the IS model," he notes.

Like others at the time, Parrick believed that building a supplier network that could bypass the telephone network without having to use all the legacy infrastructure was possible. By 1997. Parrick had left U S West to start a company called Diamond Lane Communications Corp. As a manufacturer of carrier class digital subscriber line (DSL) access multiplexers, Diamond Lane became one of the first companies to commercially deploy DSL equipment in the U.S.

Nokia bought the company in March 1999 for $125 million. After the sale, Parrick began talking to venture capitalists about pursuing his vision of building optical IP networks. "There were a number of venture capitalists who suggested that there were a few others doing something similar," he says.

Frank Robles and Peter Kaminski, in fact, were pursuing the same goal at NanoSpace, a Palo Alto, CA-based Internet service provider they started after leaving Netcom, according to Parrick. Robles was trying to leverage Palo Alto's new municipal fiber ring by delivering high-speed data services using ethernet. Kaminski, a software engineer, had already made a name for himself by developing the first graphical interface to the Web. "We eventually met and merged our interests," Parrick says. "This was a much bigger opportunity than any of us had thought."

Parrick then recruited Kamran Sistanizadeh, the CTO of Bell Atlantic Global Networks; Ron Young, an award-winning marketing executive; and Rex Fisher, a successful salesman from U S West's !NTERPRISE division.

WHAT'S IN A NAME

After a naming company failed to come up with a suitable moniker, Young was heard to say, "What if we try a name that reflects not the technology, but the customer experience, like Yikes, for `Yikes, that's fast!'" Parrick then replied, "Change the `k' to a `p' and now you have a name that embeds `IP,' which is what our network is all about."

The suitably named company then began raising venture capital, with the first round of funding raising $13.8 million. A second round of funding was oversubscribed by four and-a-half times. A third round of funding, earlier this year, raised $200 million more, including the first close of $139 million announced last October. This brings the total equity that Yipes has raised since its inception to $291 million.