3 Jun '11
Oleg Kouzbit, Online News Managing Editor
We’ll take a closer look today at Chuvashia-based nCache, a ground-breaking Internet traffic caching project that its developer claims saves an Internet provider up to 45% of external traffic costs and boosts throughput capacity 50%. Founded by an 18 year old still in college, the small firm has cobbled together $107k from family, friends and a bank loan but still has to be incubated by an allied family business. nCache is now seeking an additional $145-180k to secure a niche market in the Volga and then, hopefully, Urals areas.
With just over $100k raised over the past two years to kick-start the project and build a working prototype, the nCache team now includes five people. The firm’s goal is to grab a 30% share of the regional small and medium-sized Internet provider market within the next two years.
The project leader and a driving force behind the nCache advancement is Dmitry Arsentyev, 18, who studied computing at Moscow State University at the start of this project two years ago and now majors in management at Nizhny Novgorod’s Higher School of Economics. He recently opened the Cheb-mart Internet supermarket, the first of its kind in Chuvashia’s capital city of Cheboksary.
How it all began
The project idea began two years ago when Mr. Arsentyev developed his own Torrent and DC++ online search system. Sold later to an Internet provider as an additional application for clients, the project proved its value as a tool to curb external traffic consumption.
After a market assessment, Mr. Arsentyev created a next-gen caching product supporting more advanced types of traffic and increasing efficiency.
Saving 45% of traffic costs
According to Cisco, P2P networks and media websites offering video streaming generate an approximate 60% of global Internet traffic. Each new movie release that Internet users download thousands of times overloads rented channels and makes providers incur extra costs which they are forced to pass on to clients.
For small and medium-sized Internet providers in Russia, trunk (feeder) line rent accounts for up to 60% of overall costs. Lower-tier providers buy service from national providers like Rostelecom, TTK and others. The nCache system offers a cutting-edge type of caching that helps these smaller players save an estimated 45%.
How it works
The actual process works by analyzing traffic using a special server and then picking the most popular data (files that Internet users download most often) and sending them to a special local storage—a development at the heart of the nCache technology.
Each server set has pre-installed software that is used with a provider’s 500Mb/s channel.
Internet users typically download a lot of same data over and over again, taxing the provider’s equipment and increasing its per-download costs. Chuvash caching enables one-time downloading from external traffic for each specific file. All other clients of the provider clicking for the same data will be redirected by the system to local storage instead. And the user notices no change in how the file is received.
This puts much less pressure on infrastructure and allows the provider to be far more competitive. He can elect to charge less for service or use the savings to increase the size of his client base.
In P2P-specific traffic, which comes in packages rather than separate files, the Chuvash technology doesn’t redirect, it looks for hash sum match in packaged files to block data exchange with the Internet and activate the forced issuing of files from nCache servers instead.
A better mousetrap?
According to insiders, the nCache system is a first in Russia and outperforms typical HTTP cachers (saving a max. 3-5%) and low-capacity re-trackers (saving 9-11% of traffic but covering just 10% of a provider’s clients).
For lower-tier Internet providers, the system also offers superior performance to CDN systems, which are the dominant system domestically, but only affordable to deep-pocket providers.
Mr. Arsentyev not only claims his new system will save 45% of external traffic but increase data throughput capacity by an estimated 1.4-1.5 times.
At the moment, nCache’s operational prototype is being used by a Chuvash regional Internet provider, LocNet. According to early client reports, savings are in line with company claims and download speeds “…are much higher…”
Try before you buy and share the profits
nCache plans to use a “customer-friendly” monetization method for its project. When a provider signs up, it will get its equipment for free and nCache will get paid on a monthly basis from what the provider saves. Each provider will be offered a 30-day free trial period to assess profitability.
Despite such promise and early stage success, the company has come up dry pitching its story to investors. According to the founder, the issue was not only the difficulty in grasping the technical feasibility of the new system, but also the project leader’s tender age and his ‘unknown’ team.
Lacking outside capital, nCache has relied on investment from family and friends and cobbled together a bank loan to raise $107K.
nCache has still to achieve its own independence—the company is currently a department of a local legal entity owned by a relative of Mr. Arsentyev. The inventor claims however that if an investor is found, nCache is ready to transfer all the IP rights and staff it currently has.
Tapping institutional VC capital has been problematic so far; the minimum $145-180k the team needs to grow is too small an investment for VC funds. Russian Venture Company (RVC), a government-run business with a mandate to raise and channel investment capital into Russia’s innovative technology start-ups and early-stage expansion projects, is considering further testing nCache’s equipment after the Chuvash team won third prize at this year’s BIT Volga innovation competition.
According to nCache, one of the possible scenarios with RVC might be putting up between $175k and $285k in exchange for a 10-15% stake in the future company.
Eyeing the Volga and beyond the Urals
nCache’s immediate market is the vast Volga area that consists of 14 large regions with 21% of Russia’s population. However, Mr. Arsentyev told Marchmont he considered the regions across the Urals an even more lucrative market. The cost of external Internet traffic for providers there exceeds that of the Volga area “by at least a factor of ten,” he said.
With global Internet traffic reportedly growing 30-40% a year and Russia’s current annual demand for Internet caching estimated to be around $130m, nCache feels it has an unlimited future. But in a sector where new products and services sprout like weeds, for investors it’s still a buyers market. nCache will have to prove that its technology is not only robust and patentable, but enough clients ready and willing to share their savings to catch the attention of investors.