Ellacoya Networks

Babson Professor Julian Lange, Case Director

Walter Stock, Case Writer

Arthur M. Blank Center for Entrepreneurship

© Babson College, 2001.

Abstract

A corporate start-up does so well that, a year later, the start-up offers to buy back the equity from its parent. Cabletron Corporation provided Ellacoya $3 million in first round financing in return for a 45% equity stake because they were convinced that their employee, Kurt Dobbins, had the right combination of technical insights and leadership characteristics to start a successful business.

Dobbins put together a team for his company, some of whom were Cabletron employees, and the results were dramatic. Even though the firm of about 24 engineers had still not sold a product, the venture capitalists showed great interest, sensing the great potential of the company. However, a major condition for providing second round financing for Ellacoya was a buy-back from Cabletron. The founder now begins negotiations with his former employer.

Location of the company: Nashua, New Hampshire

Years spanned by the case: 1998-1999

Industry segments: Software

Stage of the company: Start-up

Age of the entrepreneurs: mid-30's

Key Words: Entrepreneur, intrapraneur, corporate entrepreneurship, software, buy-back, first round financing, second round financing, venture capitalists and angel financing.

DVD

There is no DVD available for this case. However there are imbedded video clips in the CD-ROM version of the case.

Teaching Notes

A five page case teaching package, written by Julian Lange, is available for this case. This case has embedded video clips in the CD-ROM version in both the teaching notes AND the case. The teaching package includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into a course.