Start-up Quarry chisels out $38 million

Quarry Technologies announced Tuesday that it completed a $38 million third round of financing highlighted by an investment from optical equipment maker Corvis.

Quarry raised $38 million in the round that was led by 3i Group along with Jerusalem Venture Partners and Corvis. The Burlington, Mass.-based maker of IP (Internet protocol) equipment has collected $66.5 million over the past two years.

Telecommunications service carriers use Quarry's equipment in metropolitan networks to provide their customers different kinds of services like encryption or voice-over-IP that can generate more sales.

"One of the reasons we like Quarry is that the company is involved in the 'last mile' space, and (that) space is going to experience strong demand" for services, said Steve Lazarus, a managing director at ARCH Venture Partners, an early stage venture capital firm that has funded Quarry.

The company also managed to raise capital during the current dark times for equipment makers; spending cutbacks from carriers have withered away the resolve of investors to fund new opportunities.

Redback Networks bought IP equipment maker Abatis Systems last October for $636 million and has seen its stock fall from about $145 a share to Tuesday's close of $15.94. Another potential competitor, Cosine Communications, has slipped to $1.63 from a 52-week high of $71.

Quarry will use the proceeds from the round to advance product development, marketing and sales, and to hire more staff.