VC watch: Substrate gets $25 million

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Recent deals

• Substrate Technologies completed a $25 million round of financing from Merrill Lynch, Carson Private Capital and Marubeni. The transaction involved conversion of existing debt and preferred stock, new cash investment, and commitments for future funding. Substrate also appointed board member Jeffrey Davis as its chairman and chief executive. The Carrollton, Texas-based company, located outside of Dallas, makes substrates, or "packages," for chips that enable them to work. Substrate operates manufacturing facilities in Texas and Shenzhen, China.

• Vernier Networks raised $24.2 million in its second round of funding, bringing the company's total financing to $34.5 million. Allegis Capital and Financial Technology Ventures led the round, and each gained a seat on the company's board of directors. The company's previous investors, such as Foundation Capital, Doll Capital Management, Masthead Venture Partners and Weber Capital Management, also participated in the round. Vernier makes equipment for wireless LANs (local area networks) that run on 802.11 technology. The Mountain View, Calif.-based company will use the cash to accelerate product development, expand sales and marketing activity, and support its ongoing business operations.

• Business Engine received $22 million in its fourth round of funding, bringing the company's total financing to about $70 million since its inception in 1987. Oak Investment Partners, which had invested in the company previously, led the round. Other participants included new investor Technology Crossover Ventures. Business Engine, based in San Francisco, will use the funding to increase its sales capacity, enter new markets, and expand its European operations. Business Engine makes software that helps businesses manage their IT initiatives such as software upgrades and installations. The company's software can also assist research-based businesses, such as pharmaceutical makers, in organizing their research projects. Business Engine pulled in $38 million in 2000 for its third round of funding and $8 million in 1998 in a second round.

• Indigo Systems pulled in $17.6 million in a first round of funding from the Carlyle Group, Founders Capital Partners, Lago Ventures and WK Technology Fund. As a result of the deal, the Carlyle Group and Founders Capital will each occupy a seat on Indigo's board of directors. The Santa Barbara, Calif.-based company makes heat-sensing infrared cameras for commercial, industrial and military uses. Indigo will use the funding for the second stage of its strategy, which is to produce products at commercially viable prices for global markets. The company has completed its initial strategy with seed funding raised from Northrop Grumman in 2000 and has built a manufacturing plant.

• Qsent raised $12 million in a second round of funding. Oak Investment Partners led the round with contributions from Voyager Capital, Maveron and Silicon Valley Bank. The round brings the Portland, Ore.-based company's total financing to $46 million. Qsent will use the capital to expand the market reach and penetration of its directory information services. The company has formed agreements with all the local Baby Bell phone companies to receive frequently updated phone numbers and addresses, which it puts into a database. Qsent then sells this information in the form of a Web-based or integrated service to debt collection agencies, insurance companies, overnight delivery services and Internet retailers.

• ProfitLine received $12 million in first-round funding from a group of investors led by Menlo Ventures. The San Diego-based company will use the funding to invest in technology, expand sales and marketing departments, and make strategic acquisitions. ProfitLine helps businesses manage their telecom resources. The services include billing management, auditing, consulting and negotiating service contracts with telecom carriers. ProfitLine's director of marketing, Gary Foster, said the company is now profitable and has no plans at this time for more fund raising. Foster added that the company will create a board of directors with five seats. Menlo Ventures and ProfitLine Chief Executive Rick Valencia will each hold one seat, and the remaining three will come from outside of ProfitLine.

• BenefitPoint raised $11 million in its third round of funding. HarbourVest Partners, which previously invested in the company, led the round and was joined by other previous investors such as Institutional Venture Partners (IVP) and Sequoia Capital. BenefitPoint provides Internet-based software that helps businesses manage and distribute employee benefits. The San Francisco-based company will use the financing to accelerate its growth plan, which includes improving its products. BenefitPoint announced in June 2000 that it raised $52 million in a second round, which was also led by HarbourVest and included participation from Sequoia and IVP as well as GS Capital Partners, First Union, Comdisco and Scient.

• Neo Photonics received $10 million in an additional portion of its most recent funding round. The total investment for the round is $35 million. Investors behind the extra funding, announced last week, include CDP Capital-Technology Ventures, Rockport Capital Partners and Linkmore Capital. The group that contributed the initial $25 million in March includes Bay Partners, Venrock Associates, Institutional Venture Partners, SBV Venture Partners and Dow Corning. As a result of this financing, Bay Partners and CDP will each receive a seat on the board of directors of Neo Photonics, a Fremont, Calif.-based company that makes components for optical telecom equipment.

• Optiva raised $9 million in its initial third round of funding. Investors included AAFA Holdings, AltoTech Ventures, ESN Group, Harris & Harris Group, NextGen Partners and Noval. The company said it received commitments from additional investors for a second phase of third-round funding; it expects the round to close in the near future at a total of between $15 million and $20 million. Optiva makes optical coating materials that can be used in flat-panel computer monitors, eyewear, cameras and other products. The San Francisco-based company will use the funding for its operational, sales and new product marketing activities. Optiva previously raised a total of $10.3 million in its first and second rounds.

• Cyanea Systems attracted $8 million in its first round of funding led by Mobius Venture Capital and Infinity Capital. Draper Fisher Jurvetson ePlanet Ventures also participated in the round. The Oakland, Calif.-based company will use the money to develop its products and enhance its sales and marketing operations. Cyanea makes software that helps companies manage their Web-based business software throughout a network.

• Matrix NetSystems raised $6 million in a second round of funding from Meritage Private Equity Funds. The Austin, Texas-based company will use the financing in its sales and operational activities to support revenue growth. Matrix provides services that help businesses monitor and manage the Internet traffic on their networks. In March 2001, Matrix raised $12 million in its first round of funding, a round co-led by TL Ventures and Meritage.

• EZ Prints received additional $4 million in a round of funding led by its previous investors PA Early Stage Partners and Cairnwood Group. The latest round brings the Atlanta-based company's total funding to $10 million. EZ Prints provides Internet-based digital photo-processing services and will use the funding to expand its offerings to commercial customers, professional photographers and consumers. EZ Prints said in a statement that it has grown its revenue for 24 consecutive months and expects to reach profitability by the first quarter of 2003. The company also said it believes it will not need more financing. EZ Prints provides photo-finishing services to Yahoo Photos, Microsoft and others.