VC watch: NuVox raises $78.5 million

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• Put NuVox Communications raised $78.5 million in fourth-round financing, the telecommunications company said Wednesday. Of that, $66 million was in equity financing from Goldman Sachs, J.P. Morgan Partners, Whitney & Co. and Meritage Private Equity Fund. The St. Louis-based company also received $12.5 million in debt financing from General Electric Capital and CIT Lending Services.

NuVox, which sells Internet access with local and long-distance phone service to small and medium-sized businesses, has used the funds to pay down some of its existing debt and will use the rest to fund operations, said CEO David Solomon. NuVox expects to be cash-flow positive by the fourth quarter of 2004, he said. As part of the new funding and the restructuring of its debt, NuVox scaled back some operations, reducing its headcount over the last 60 days from 1,000 employees to 850, Solomon said. The job cuts targeted the direct sales force and back-office operations. NuVox has raised a total of about $500 million, Solomon said.

• Broadband services provider Arriso Networks announced this week that it has raised $16.7 million in an initial round of funding led by venture capital firms InterWest Partners, CenterPoint Ventures and Sevin Rosen Funds.

The Richardson, Texas-based company develops telecommunications products for converged networks. The money will be used for all operations, with emphasis on research and development. A spokeswoman said Arriso has customers, but cannot give their names due to non-disclosure agreements.

• RLX Technologies, a struggling company that pioneered the ultrathin "blade" server concept, raised $15 million in additional funds, the Houston company said Monday. Soros Private Equity Partners and Sternhill Partners led the investment round, while Cockrell Investment Partners joined for the first time. Other investors in the round include Ignition Partners, ComVentures and First Dallas Ventures. RLX's future strategy includes trying to build partnerships with software companies and a "major marketing campaign" in the fourth quarter.

RLX got its start selling a system that packed 24 servers with Transmeta processors into a 5.25-inch-tall enclosure. The design led to competing products from IBM, Dell Computer, Sun Microsystems and Hewlett-Packard, the last of which is the only company to release a blade server product so far. But RLX has struggled financially. Many executives left last year, and the company has diversified into Intel-based products.

• Supply chain software company V3 Systems has raised $11.5 million in a first round of funding. The round was led by Sterling Venture Partners, and other participants included venture capital firms Draper Atlantic Management, SpaceVest and Updata Venture Partners.

V3 Systems? main product is a software package that does warehouse and inventory management and supply chain execution. The Charlotte, N.C.-based company plans to use the money for global sales and marketing campaigns. Among the company's customers are Compaq Computer, Dell Computer, Nokia, Alcatel and Nortel Networks.

• Enterprise software developer Nextance has raised $10.6 million in a third round of funding led by venture capital firm 21VC Partners. Also participating in the round were previous investors Onset Ventures and El Dorado Ventures.

Redwood City, Calif.-based Nextance, which has raised a total of $22.6 million, plans to use the money to increase sales and marketing efforts. Nextance's software applications help companies manage contracts and other business processes.

• Security software company Vigilante has received $7 million in a third round of funding, led by Fafner Holding BV and including previous investors BankInvest and Danske Venture Partners, Vigilante CEO Eric Fullerton said. The Beaverton, Ore.-based company, which has raised a total of about $27 million, plans to use the new funding for sales, marketing and product development, Fullerton added.

As part of its funding announcement, Vigilante, whose software helps companies monitor the security of their computer systems, also said it has discontinued its services business. The company formerly helped companies monitor and assess their security vulnerabilities but has since farmed that business out to service providers who have agreed to use Vigilante's software, the company said. As part of the closure of its services business, Vigilante shut down its offices in Copenhagen, Denmark, and laid off about 40 people in the United States and Denmark in late June, Fullerton said.