Low-power audio chipmaker Kleer Corp. said Wednesday it closed a second phase of a $28 million Series B funding round to support production of chips now hitting the market to power high-quality wireless consumer electronics devices.
The deal adds $15 million to a round initiated in September 2005, and was led by TL Ventures of Wayne, Pa., and BDC Venture Capital of Toronto, and included Series A investors US Venture Partners of Menlo Park, Calif., and VenGrowth Capital Asset Management Inc. of Ottawa, Ontario. Kleer will use the new financing to support production of chips used in MP3 players, adapters and headphones, among other products.
Kleer CEO Levent Gun said the new investment came at the same terms as the original close of the round, and that the company did not seek new investors. Gun said he expects the company's chips to be installed in a wide variety of devices from numerous manufacturers over the next year, and he said the company will likely approach new investors for additional growth capital in 2009.
Kleer was founded in 2002 to develop low-power wireless chips and raised a small amount of angel investment, but shifted development to focus on high-quality audio with its $10 million Series A round in 2003.
Gun, an "entrepreneur in residence" at USVP at the time, said he was attracted to the company's low-power wireless architecture, noting that he saw an opportunity to tailor development to a niche market of device manufacturers. "One of the good things about being an EIR is you have a lot of time, and I was talking a lot to people at Apple and Sony, and even in 2003 a lot of MP3 manufacturers were looking at wireless," Gun said. "They needed low-power chips, but they were not going to compromise at all on audio quality."
Paul Smelters, a partner with VenGrowth, said that wireless chips used for high-quality audio transmission and reception have typically relied on buffering technology to eliminate crackles and pops, but has sacrificed sound fidelity. He said Kleer directed its last round of funding to creating chips that delivered the highest sound quality possible, while meeting extremely low-power requirements.
Gun said that by the time of the first close of the current round, the company had qualified its chips in laboratory testing and began seeking customers. Kleer produced its first chips last summer, and its first products hit the market at the end of 2007 in MP3 players and wireless ear bud headphones produced by RCA Thompson.
Although Kleer did not take the current funding to new investors, the round was oversubscribed, with some existing investors taking larger than pro-rata shares. Smelters said the company has met expectations since focusing its product development on the high-end audio market. "The company is still in the leadership position, and we need to accelerate our design win momentum," he said.
Kleer did not use an outside financial adviser in closing the round, and had legal work on the deal from Jeffrey Harrell of Pillsbury Winthrop Shaw Pittman LLP in Palo Alto, Calif. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP in Menlo Park represented the investors.
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