Since the telecommunications equipment market melted down in 2001, much of the industry abandoned internal chip development and relied largely on software improvements to build faster, cheaper switching and routing products. But a handful of companies including Xelerated AB, stuck with proprietary silicon development, and by taking a series of relatively small capital rounds along the way, the Swedish company now think it's in position to reap the rewards as carriers begin to accelerate their capital investment in networking gear.
Xelerated has
raised $13 million from lead investor Sixth Swedish National Pension Fund, along with other previous investors Accel Partners, Alta Partners, Amadeus Capital Partners and Atlas Ventures, in a round the company expects will finally take it over the top to positive cash flow. The eight-year-old company has design wins with multiple switch and router makers, notably Fujitsu and Huawei, and has been shipping products for about five years. But given the long design, proving and certification cycles in the industry, Xelerated CEO Thomas Axelsson says this year is the first that has generated large, though undisclosed, revenues.
Xelerated will use the new funding to develop new products for the metro, access and large enterprise network markets, and to expand sales and marketing of chips already in production. Axelsson says the round was positioned to provide enough capital to fulfill its business plan, but notes that investors are prepared to advance more if the need arises.
The executive joined the company in August 2007 in conjunction with a $23 million round closed in May with Sixth Swedish and Amadeus as new investors. "I saw the need for bandwidth growing in Sweden and internationally and the expectation that high-capacity networks will need to be built seemed reasonable," Axelsson says. "At that stage the company had two products but nothing had reached volume, but the market is finally increasing."
If carriers do renew heavy investment in their networks, they'll likely bypass the more commoditized products equipment manufacturers have been churning out the last five years to look for differentiated products with custom silicon. If so, Amadeus and Accel will be particularly gratified, as they not only have stakes in Xelerated, but also recently backed a $17 million late-stage
round for fellow chip survivor Solarflare Communications Inc. -
- Clifford CarlsenSee Aug. 14 press release on latest funding from Xelerated ABSee June 17 post on Solarflare from Tech Confidential
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