Inside the Blackwave of Online Video

I was reading this week about Blackwave, an Acton, Mass.-based startup that just changed its name (from Acinion)Blackwave and got a whopping $16 million from Sigma Partners, Globespan Capital Partners and IDG ventures, and all I could think was: What makes this company worthy of such a massive cash infusion?

As it turns out, two words: online video. Blackwave has come up with a new kind of hardware that combines all sorts of network elements — load balancers, storage systems, streaming servers — into one package, topped off with a Mensa-quality management software layer.

This isn’t the first time a startup has taken a do-it-all, “God box” approach to building hardware, mind you. And since most of them have failed, Blackwave’s future is far from secure. Still, their approach does have a certain logic to it.

When it comes to web infrastructure, most companies typically buy boxes from different sources — storage systems from the likes of Network Appliance (NTAP) or Isilon (ISLN), for example; load-balancing gear from Cisco (CSCO), switches from Foundry Networks (FDRY) and servers from Hewlett-Packard (HPQ), Dell (DELL) or Sun (JAVA). They then try to build a bespoke solution, managed with specialized software.

Blackwave has basically taken all of the boxes, put them into one device and made the device good at one thing — delivering rich media content (loose translation: online video) as smartly and cheaply as possible. “We can reduce the hardware costs by a factor of ten,” says CEO Robert Rizika. Why? Because the system can adjust itself according to traffic needs — almost like pants that adjust to the size of the meal.

Let’s say, for example, that an online video destination is hosting a Britney Spears video clip. The system has allocated 100 concurrent users to stream the video when suddenly, it gets linked to Matt Drudge’s web site, and the number of people who want to watch the video balloons to 100,000. The system will automatically reallocate resources to that video. Rizika claims other benefits. “Most single rack (servers) can handle, say, 2,000 concurrent streams, and we can handle 20,000 concurrent streams,” he boasts.

It is hard to assess how realistic those claims are since the company refuses to talk about how it’s getting things done inside its boxes; Rizika refused to even let us know if Blackwave was using its own chips. “We use off-the-shelf components,” is all he would say.

At this point I would typically become skeptical about a company’s claims. But Blackwave has two things going for it — Chief Technology Officer David Carver, and overall market trends.

Carver was previously director of research and development at video-on-demand company SeaChange (SEAC); prior to that, he worked at video conferencing supplier PictureTel Corp. In other words, he knows digital video very well, and understands its complexity.

The second thing working in Blackwave’s favor is the fact that the market is crying out for a solution like theirs. For quite a while, bandwidth (despite steady price declines) took up a major chunk of the money spent on delivering content over the Internet. Hardware, thanks to rapid commoditization, commanded a far smaller share of the monies spent. Now the pendulum is starting to swing in the other direction, with hardware consuming more of the total budget.

Blackwave backer Jonathan Seeling of Globespan Capital Partners and co-founder of Akamai told The Boston Globe:

“Most of the stuff out there today to store Web video is really systems that were always designed and always intended” for businesses that needed to store and sort through masses of data, not movies.. “People weren’t thinking about traditional storage systems as being used for delivering very large monolithic files of video.”

Rizika declined to give details as to who is currently using Blackwave’s boxes, but he did hint that the three-year-old startup counts a social network, a media company, and a user-generated content web site among its customers. Some speculate that the media company might be NBC. They are hoping to get other media companies and content delivery network operators to buy its gear.

They better do it fast – the cushion of venture capital cash can deflate very quickly.