Atrica Hauls In $75M Fourth Round

Tied for first place with Catena Networks Inc. for the largest venture deal so far this year, metro optical ethernet equipment provider Atrica Inc. late last week hauled in $75 million in its fourth and largest round of financing to date. All told, Atrica has now raised a grand total of $117 million from the venture capital community.

At a time when it seems optical plays are becoming but a dim blip on VCs’ radar screens, Atrica says it is garnering attention because it offers a carrier-class product. Although telecommunications carriers have been notorious for their stingy spending habits over the past year, they happen to be upping their cash outlay for metro optical and optical ethernet technologies, precisely the space Atrica has chosen.

That there is a tangible market for the Santa Clara, Calif.-based company’s offering certainly turned the heads of more than a few venture investors when Atrica went out to raise its latest round of financing. Leading the oversubscribed Series D transaction was new investor St. Paul Venture Capital, who was invited into the round when Atrica President and CEO Vivek Ragavan asked his former boss, Bill Cadogan, who is a general partner at the Minneapolis-based firm, if he’d be interested in investing in the company. Cadogan is the former chairman and chief executive of ADC Telecommunications, and Ragavan reported directly to him there for three years.

Other newcomers included JK&B Capital, Investor Growth Capital, Saturn Venture Partners, Gemini Israel Funds, Lehman Brothers and others. Seed investor 3Com Corp. also re-upped, as did Benchmark Capital, Accel Partners, Ascend Technology Ventures and SBC Communications.

The company originally set out to raise just $60 million, then decided to up its target to $75 million once its fund-raising momentum picked up and investors began to show some real interest, Ragavan says. With this latest round, Atrica is now fully funded, and expects to reach profitability in early 2003. Market conditions permitting, it may also go public next year if the company can record a few consecutive, profitable quarters, Ragavan adds.

Atrica certainly seems to be striking while the metro optical iron is hot. The market, which officially emerged last year, Ragavan claims, is expected to be worth as much as $1.6 billion by next year, according to reports published by various industry watchers such as The Gartner Group and IDC.

The company’s primary customer target is competitive local exchange carriers (CLECs). Although they haven’t done well in the U.S., Ragavan insists the metro optical ethernet market is global, and CLECs are thriving and have money to burn in other parts of the world. Atrica also targets incumbent local exchange carriers (ILECs) and interexchange carriers, and expects those two groups to make up a larger part of its business as the company grows.

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