As part of a "stealth" strategy charade that venture-backed companies occasionally employ to generate maximal publicity when their products launch commercially, Zeugma Systems Inc. is being cagey about the precise architecture of telecommunications equipment set for general release next year.
But in landing a $22.5 million
second round that will allow it to bring product to market on less than $40 million in funding, it's clear the three-year-old Canadian company has successfully delivered on a post-bubble strategy of relying on off-the-shelf components to build next-generation broadband delivery equipment.
The long list of late-1990s companies that largely failed to deliver on expensive campaigns to build products from scratch includes Caspian Networks, Pluris Inc., Procket Networks Inc., Hyperchip Inc., Charlotte's Web Networks, Avici Systems Inc., BigBand Networks Inc. and Chiaro Networks Ltd. And while some are now gone completely while others have stuck around, the market is quite hospitable to companies like Zeugma that came late to the game and are now lined up to take advantage of the race to deploy triple-play broadband services.
Of the bubble-era companies that survived, BigBand is one that managed to recoup venture backers' $100 million invetment, raising $139 million in a
public offering last March. But public investors have been less fortunate, seeing the company's stock fall steadily from more than $20 per share shortly after the IPO to a current level of $5.60.
Zeugma expects to raise another round before getting to profitability, and anything can happen. Despite the risks, investors gave the company a ringing endorsement in pricing the company's new round at a 20% jump over the company's A round just 17 months ago.
- Clifford CarlsenSee Dec. 13 story from TheDeal.com See March 15 story from TheDeal.comSee Dec. 13 press release from Zeugma
Continue reading below
