Startup Thrives Amid Telecom Slump By Kathy Carlson The Tennessean May 12, 2003

Why would someone want to start a business in a slowing economy and in the cutthroat telecommunications industry?

Cliff Duffey did just that, after a stint with the now-defunct Internet service provider BlueStar Communications. ''I really enjoyed the growth and development days of BlueStar,'' Duffey said in a recent interview from his office at Cybera, where he is president and chief executive officer.

Duffey, 32, graduated from Clemson University with a bachelor's degree in computer engineering. He worked for two other telecommunications companies before moving to Nashville in 1999 to work with BlueStar. The Franklin-based subsidiary of Covad Communications ceased operations on July 31, 2001.

When he left as BlueStar's chief technology officer in November 2000, Duffey wanted to give ''one more shot'' to growing a company.

Three months later, he and two former BlueStar colleagues started Cybera.

The company sets up private voice and data networks for small- to medium-sized businesses. It's grown from three employees to 20 and moved from its birthplace — a bonus room over a garage — to an office park near the Nashville Zoo at Grassmere.

The company creates the private networks by first leasing parts of telephone companies' high-speed Internet lines, such as BellSouth digital subscriber lines. Cybera connects users to the DSL via computer equipment called a virtual router that allocates broadband capacity among the users.

Cybera's network uses only its own leased DSLs, not what Duffey calls the public Internet, which is shared by millions of people and companies and is vulnerable to hackers and viruses. The system offers security and cost advantages, Duffey says, because its customers need not install protective ''firewall'' software to secure each user's location.

''I don't label us,'' Duffey said of his company's network-building services. Duffey doesn't think of Cybera as offering a virtual private network, ''because that is almost always thought of as going over the (public) Internet.''

Keith Weber, information technology director for Nashville's Cooker Restaurant Corp., chose Cybera's networking services over three competitors, two small and one large telecom company. The goal was to tie together communications for 33 restaurants in three states.

He chose Cybera for pricing, encryption and the potential for better service because Cybera is Nashville-based. Two weeks after signing up, 31 of 33 locations are connected and the network is working well.

Duffey says Cybera's system improves on current technology and costs less. The only downside for a customer, he says, is the risk inherent in new technology.

Technology investors also are risk-averse these days.

''For a startup to try to break into this business, I would think, would be really difficult,'' said Patrick Comack, a telecommunications analyst with Guzman & Co. in Miami. ''Venture capital is hard to come by these days.''

Current demand for private network services is being ''handcuffed'' now because of a tough economic climate, Comack said, but ''it's going to be absolutely huge'' because of how it will ease business-to-business communications.

''There have been some difficult times,'' Duffey said. ''It's been very, very difficult to raise money in this telecom environment.''

In 2001, Cybera had a venture deal due to be closed at end of September, Duffey recalled. After the 9/11 attacks, Cybera ''had to go back to the drawing board to come back with funding.'' In late September, he recalled, he ''was more than a little bit concerned.''

The company eventually found a new investor, and Cybera now is ''100% owned by the founders and the people who really believe in us,'' Duffey said.

He plans to try to raise additional capital later this year to expand the business. Duffey would not say how much had been invested in Cybera so far, or to give revenue figures, saying financing efforts prevented him from doing so.

''I think this is a difficult time to start a company, but that doesn't mean it's the wrong time. … If you want to start a company (you must have a) much stronger commitment to stick with it and maybe put more at risk.''

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