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INVESTING IN PENNSYLVANIA’S FUTURE

FORE Systems: The Ripple Effect of a Pittsburgh Success Story

When Carnegie Mellon students developed their Department of Defense research project in the 1980s, they never dreamed it would turn into an industry leader that would become the model for new venture capital and technology growth in the Pittsburgh region. But that’s exactly what happened, which is why FORE Systems is considered one of Ben Franklin Technology Partners’ biggest success stories.

FORE Systems

Since FORE Systems was acquired by Marconi, it has spun off a number of new technology companies, employing hundreds of people and raising hundreds of millions in venture capital. One of the most recent successes, Spinnaker Networks, was sold to Network Appliance for $300 million. Spinnaker was founded by former FORE employee Ron Bianchini (above).

FORE Systems, now part of Ericsson, was a technology company that began as a small startup in the Squirrel Hill area, and the effect of its success can still be felt in the region. The company put Pittsburgh on the radar screens of investors, talent and international media, and it has become a legend for what can grow from an idea when the right people and organizations take a chance on it.

FORE received its first local investments totaling $145,294 from the Ben Franklin Technology Center (the precursor to Innovation Works) for further development of its high-speed ATM switch and network interface. “This enabled us to bring on the engineering talent to develop the prototype,” says Eric Cooper, FORE Systems’ co-founder. “The Ben Franklin model for investing is important for helping early-stage companies get started because it isn’t constrained by the same ROI expectations that a venture fund would have,” he says.

A Highly Successful IPO

By late 1992, FORE completed its first round of venture capital financing of $5 million with a market valuation of $15 million. From there, it grew into one of the most successful IPOs of the time and was eventually acquired by Marconi (which in turn was bought by Ericsson in 2005).

The Marconi acquisition didn’t stop FORE’s ripple effect, however. Since it was acquired, FORE has spun off a number of new technology companies, employing hundreds of people and raising hundreds of millions in venture capital. One of the most recent successes, former FORE employee Ron Bianchini’s company, Spinnaker Networks, was sold to Network Appliance for $300 million.

Bianchini is just one example. FORE has repeatedly impacted the Pittsburgh region through the number of seasoned entrepreneurs it brought to the area. Many former FORE entrepreneurs have channeled the passion they felt for FORE into starting new companies, advising others and teaching students about starting a business.

And these FORE alumni have enriched the area with their generous donations to the arts, education and other nonprofits; FORE’s founders, for example, endowed a $15 million chair in computer science at Carnegie Mellon.

An Impact Felt Far and Wide

In addition to making history with its own success, FORE also created a cushion for fellow startups in the Pittsburgh region. A new group of millionaires emerged after the Marconi acquisition who have invested in venture funds and made angel investments in other local early-stage companies. And existing established organizations have reaped benefits as FORE’s success brought recognition and credibility to the area and made recruitment a little easier, particularly in the technology community.

Cooper says the successful growth of FORE Systems-and the lasting positive effects the company has had on the Pittsburgh area-is due in part to the initial investment from IW. “It’s a big challenge early on getting someone to take that risk,” he says. “Investments from an organization like IW are critical because they (IW) are not beholden to limited partners, and they can focus on this geographic region.”

FORE Systems’ story illustrates that IW and other Ben Franklin investments do not just help nurture startup companies in their early days; the impact of these investments of money, time, and resources can be felt far and wide. FORE Systems has touched the Pittsburgh technology industry for the past 25 years, and the company’s legacy will surely live on for many years to come.

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This article was featured in
Keynotes January, 2008
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