Laser start-up garners $50 million in funding

AirFiber, a maker of laser-based networking equipment, will announce Thursday that it has secured $50 million in a third round of financing.

AirFiber is one of a handful of companies developing "free space" optical hardware, which transmits information over fiber-optic lasers in the open air. Invisible free-space lasers, which are safe to the human eye, are capable of beaming information through an office windowpane.

Without the need to dig up streets to lay fiber-optic wires, carrier customers are expected to save money and reduce the time it takes to activate service for their business and consumer customers.

Several players including Optical Access, fSONA Communications, LightPointe and Plaintree Systems are making similar gear, and Terabeam, a free-space laser service provider, has a close manufacturing partnership with Lucent Technologies. AirFiber also has a resale pact with Nortel.

"This means a pretty healthy endorsement of the market space and of our company," said AirFiber Chief Executive Jim Dunn. "It's particularly meaningful in terms of the market conditions out there."

The funding round was led by GM Capital Partners and included London Merchant Securities in addition to AirFiber's existing investors, such as Nortel Networks, Qualcomm and venture capital firms Foundation Capital and Enterprise Partners.

Gartner analyst Mark Fabbi says the use of lasers to route data streams through free air will find its place, but it's not likely to become a mainstream optical-networking technology. see commentary

Privately held, San Diego-based AirFiber will use the funds for general corporate purposes, which include producing its OptiMesh gear designed to deliver Internet, data and voice traffic in metropolitan areas at speeds up to 622Mbps.

AirFiber has succeeded in obtaining funding at a time when many technology companies are going bust because of an inability to finance their operations. Optical-networking companies have been among the few to attract the attention and dollars of venture capitalists, particularly those companies targeting metropolitan-area networks.

However, communications equipment makers have particularly high capital costs and are facing a difficult sales environment. Many carrier customers are sharply reducing their spending as U.S. and global economies slow and their profits shrink.

AirFiber has claimed Spanish service provider Alua as a customer. Other carriers, such as Allied Riser Communications, are testing the company's hardware, according to executives.