Mintera raises $19M

The rounds bring total investment in the seven-year-old company to more than $73 million.

The deal was co-led by RRE Ventures of New York and Polaris Ventures Partners of Waltham, Mass., and included investment from other previous investors Court Square Ventures of Charlottesville, Va., Star Ventures of Dallas and PortView Communications Partners of Armonk, N.Y.

Mintera will use the new money to boost sales and marketing of its optical transport systems to manufacturers of telecommunications equipment that serve the metro and long-haul carrier markets, and to continue to develop new products capable of transporting data and media at the highest speeds possible.

Polaris general partner Bob Metcalfe said investors initially considered taking the round to potential new financial investors, but after considering some acquisition offers, decided to keep the deal among insiders and to bring in a strategic investor. The company did not disclose terms of the new investment, but Metcalfe said it came at a premium to the company's $28.5 million Series B round closed in October 2006 and that pricing was in line with offers to buy the company.

"We didn't think it was necessary to go to outside investors, and in fact, Polaris went super pro rata in the amount we took in the round," Metcalfe said. "We have the new platform product in general availability, and JDSU is a major supplier to the component industry, so we formed this partnership to strengthen the supply chain."

Niall Robinson, Mintera's vice president of product marketing, said Mintera has been selling components since 2004, but the company's launch of its MI 40000XS fiber-optic transport subsystems in February has it on track to ramp up sales quickly. He said the new money is expected to take the company to positive cash flow.

Mintera was formed in 2000 to develop 40 gigabit-per-second, or 40G, optical transport capabilities to help large carriers increase network capacity and speed to accommodate growing Internet use and increasing broadband multimedia traffic. The company developed capabilities early on to allow equipment makers to upgrade systems from 10G speeds to 40G after raising $26 million in a Series A round led by Court Square, but slowed development as the optical equipment market crashed and nursed its initial capital over the next four years.

"When we invested in 40G in 2000, we expected there would be a market for it in 2002. But with the bubble burst, the market didn't really develop for another four years," said Court Square managing partner James Murray. "But the company always had the best technology, and now we are demonstrating that with customers and have teamed up with one of the most crucial component suppliers to the industry."

Nick Maynard, a program manager with Boston-based Yankee4 Group's network infrastructure group, said there will be a need for long-haul and metro market carriers to upgrade to 40G equipment. But he said the market is just starting to emerge and that by the time demand is high, there likely will be several suppliers.

"It is still early days for 40G, and while a lot of carriers have it on their road map, they don't necessarily need to buy equipment now when 10G is much cheaper," Maynard said. "The larger trend driving interest is video, mobile data and interactive applications, and there is no sign of that slowing down. And all networks will have to have increased capacity, but there is going to be a lengthy migration process."

Maynard acknowledged that as a leader in 40G capabilities, Mintera has a great opportunity to reach potential customers through its partnership with JDSU, but its success will depend on demand coming quickly before other suppliers emerge and margins come down. JDSU, while remaining the dominant optical components supplier throughout the telecommunications bust, has been squeezed by profit margins itself, and has lost money for the last several years.

Mintera will work closely with JDSU to reach potential customers with its own products, Robinson said, and will work jointly to develop a transponder product to convert signals from electrical to optical formats and back again, which will be available in the first half of calendar year 2008.

Mintera did not use an outside financial adviser in putting the new round together. It had legal representation from John Chory and Stacy Krause of Wilmer Cutler Pickering Hale & Dorr LLP in Boston. Financial investors were represented by Arlene Bender of Foley Hoag LLP in Boston. JDSU worked with Edward Batts of DLA Piper US LLP in East Palo Alto, Calif.