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Start-up Allegro nabs another $50 million

Communications equipment start-up Allegro Networks soon will complete a second round of financing totaling more than $50 million.

Communications equipment start-up Allegro Networks soon will complete a second round of financing totaling more than $50 million amid a tepid investment climate in the technology industry.

The company, headed by former Intel and Nortel Networks executive David House, is building hardware and software that can route data for hundreds of companies at a time. Telecommunications companies could generate sales by using Allegro's technology to offer routing as a technology service. Typical routers, from the likes of Cisco Systems and Juniper Networks, route data for a single customer or network.

Original Allegro investors Columbia Capital, Bessemer Venture Partners and Infinity Capital are joined in a second round headed by Thomas Weisel Venture Partners. Other second round investors include Rustic Canyon Group, WK Technology fund, and individual investor House.

The funding comes during tough times for the telecom industry, with numerous network operators going out of business and their equipment suppliers struggling to stay afloat.

"In the communications (market), in general, it is very difficult right now," said Andy Sessions, a partner at Thomas Weisel Venture Partners and a newly elected board member at Allegro.

The financing round is still open, with the company hoping to attract another $10 million or so in funding in the next 30 to 60 days, according to a company spokesman.

As part of the funding, Sessions and Rustic Canyon partner Mark Menell will join the board.

The company is in the midst of testing the software part of its technology with several telecommunications carriers, according to House, with full system tests of the hardware and software slated for the first half of next year. The company expects to generate initial sales by the middle of next year, he said.

House said the climate for a start-up raising money has changed drastically since the days of the telecom boom in the late 1990's. "The diligence is unbelievable," House said. "Investors are looking for ways to say no."