Insieme: Cisco's Latest 'Spin-In'

Cisco announces its third “spin-in,” a controversial way to develop tech
Mario Mazzola Photograph by Lifestock/Getty Images (employee pin)

Mario Mazzola may have the best gig in Silicon Valley. Other innovators pursue their dreams at the risk of failure; there are few safety nets for an entrepreneur. But Mazzola, who builds computer networking products, is the main beneficiary of a controversial model known as the spin-in. Not once, not twice, but three times, Cisco Systems has agreed to fund and buy companies founded by Mazzola and his longtime lieutenants, Prem Jain and Luca Cafiero, when the startups were little more than ideas. In each case, Cisco invested $50 million or more for a stake in the company, along with an option to buy the remaining shares at a certain date. The final price, while tied to how well the startup’s products sell, is generous. Cisco paid $750 million for Mazzola’s Andiamo Systems in 2004 and $678 million for Nuova Systems in 2009. On April 19, Cisco said it was prepared to spend as much as $750 million for the trio’s most recent effort, called Insieme.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.