Riding the Wave of Network Transformation: Investing in Arrcus

Hitachi Ventures
4 min readJul 10, 2023

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We are excited to announce our participation in the Series D investment round of Arrcus, the hyperscale networking software company and a leader in core, 5G/edge and multi-cloud virtual routing and switching. The round was led by Prosperity 7 with participation from Liberty Global, General Catalyst, CLEAR Ventures and Lightspeed.

We believe that Arrcus’ innovative solution combined with a strong team with proven execution capabilities and market traction make it a compelling investment opportunity in the rapidly evolving networking industry. With the increasing adoption of Arrcus routing and switching solutions by Fortune 500 and Global 2000 customers, Arrcus and Hitachi Ventures are excited about the future potential of this technology.

In this blog post, we will discuss the rationale behind our investment decision.

Current State of the Industry and Emerging Opportunities

While Generative AI applications are on top of everyone’s minds, the technology’s impact on the underlying infrastructure cannot be disputed. Generative AI models not only require large amounts of data for training, but the models themselves can also be large and span multiple devices. Efficiently distributing models for deployment or sharing them with collaborators will require high-speed networking infrastructure or optimized compression techniques to reduce model size. The speed and reliability of the network infrastructure can impact the efficiency of data transfer, especially in distributed training scenarios where data and models are spread across multiple machines.

In the infrastructure domain, hyperscalers are a bellwether for things to come — from Meta to Google to AWS, the hyperscalers are rethinking their datacenter and network design to meet the AI capacity. While the hyperscalers innovate across every layer of the technology stack, how can others, be it enterprises or telcos keep up with the growing need for flexible, cost-effective, scalable and programmatic networking solutions based on technologies that were built on networking protocols designed for the datacenters of the 90s?

Redesigned from first principles, the network OS of Arrcus is well-positioned to capitalize on these emerging opportunities and offers a single scalable architecture from the data center to the edge to the multi cloud. By disrupting the traditional networking landscape, Arrcus is enabling both enterprise and network operators to employ modern end-to-end technology and drive greater efficiency, flexibility, and growth.

Company Background

Founded in 2016, Arrcus is disrupting the traditional networking industry with its innovative Arrcus Connected Edge (ACE) platform. The ACE platform is fully programmable, allowing for automated deployment and management of network services delivering massive scale and high performance for flexible and secure multi-cloud connectivity along with features like traffic engineering and telemetry. The platform enables customers to lower costs, shorten deployment cycles and monetize their infrastructure more efficiently.

Figure a: Arrcus Multi-Layer Platform

The ingenuity of their network OS, ArcOS, enables them to easily build out a number of networking and security functionalities (e.g., Multi-Cloud Networking, Virtualized Distributed Routers, 5G network slicing) on top of the infrastructure. This innovative approach allows Arrcus to respond quickly to market demand and adapt to the changing needs of modern network environments.

Market Traction and Competitive Advantage

We believe Arrcus has achieved an inflection point in 2022 and is set to continue its growth in 2023 and beyond. The company serves enterprises in various industry verticals, including telcos or communication services, cloud- providers and enterprises (retail, finance, SaaS and others).

Figure b: Customer entry point for Arrcus varies depending on the customer type

This strong performance indicates the market’s confidence in Arrcus’ product capability to capture the growing demand for next-generation networking solutions. Moreover, Arrcus has forged partnerships many industry leading customers and partners spanning telco, cloud and enterprise including Softbank, Liberty Global, Coresite, VMware, and RedHat. Arrcus’ competitive advantage lies in its ability to offer a flexible, cost-effective, and scalable networking solution that can compete with both large incumbents and smaller disaggregated NOS providers.

We are also super excited to be partnering with Arrcus’ management team. CEO Shekar Ayyar, who most recently served as executive vice president and general manager of VMware, where he was responsible for the company’s telco and edge cloud business, one of the fastest growing vertical businesses for VMware. His experience complements the deep networking expertise of co-founders Keyur Patel (CTO) & Derek Yeung (Chief Architect) and we’re looking forward to seeing how Arrcus’ disruptive approach to networking will reshape the industry and deliver significant value to both customers and investors.

You can see the full press release here.

If you are a startup addressing challenges in the modern IT tech stack, please reach out to us on Linkedin, we would love to get to know your company!

Authors: Gayathri Radhakrishnan, Galina Sagan, Vamsi Patti at Hitachi Ventures

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Hitachi Ventures

Hitachi Ventures is the strategic CVC arm of Hitachi Ltd. We support founders through investments and by helping foster collaborations with Hitachi.