Banderacom Bottles $35M Series B Deal

Gearing up to become a major contender in the high-stakes race to unclog Internet bottlenecks, fabless semiconductor start-up Banderacom recently secured $35 million in its second round of venture financing.

What separates Austin-based Banderacom from other semiconductor plays is that its system-on-a-chip architecture uses an up-and-coming technology called InfiniBand (short for infinite bandwidth) that helps make servers and other Internet infrastructure equipment more scalable and reliable. Based on a packet-based switching technology, InfiniBand is designed to significantly reduce Internet congestion and ensure more reliable data transport over the World Wide Web.

As Austin is becoming a veritable hotbed of InfiniBand activity ? at least three such companies there have received funding within the past few months ? Banderacom fared well in its fund-raising efforts despite an overall tightening of VCs? purse strings. The company originally set out to raise about $25 million, and ended up closing the round with a few interested investors still lingering on the sidelines.

Although Banderacom CEO Les Crudele said he won?t likely re-open the round to draw additional capital, those would-be investors may have a chance to get in on the company?s Series C financing, slated for the second quarter of 2002.

“We?re going to need to raise money one more time, and it will be another similar-sized infusion, maybe a little smaller, as we start to build our revenue ramp next year,” he added.

New investor Infinity Capital led the Series B transaction, and was joined by fellow newcomers QLogic Corp. and Trinity Ventures. Series A lead Austin Ventures also re-upped in this round, along with previous backers Crossroad Systems, Intel and Jato Tech Ventures.

Infinity Capital Managing Director Bruce Graham also received a Banderacom board seat as part of the financing.

“Bruce and I served on a board together last year, and we made our presentation because of that past association,” Crudele explained. “Bruce and his partners put [Banderacom] through the paces, and decided they saw something interesting.”

InfiniBand Explosion?

Indeed, the InfiniBand space is garnering a lot of attention, both among VCs and the data center and storage area network clients Banderacom hopes to serve when it ushers its first products out to the marketplace within the next year or so.

“InfiniBand is the successor to the existing input/output technology in servers and communications gear,” explained Stephen Straus, a general partner with Austin Ventures. “There are almost no InfiniBand products on the market, but they will emerge in the next two to three years.”

One of the earliest investors in InfiniBand technology, Austin Ventures has already funded three firms based in or near its home town, including Banderacom. Instead of representing competition for Banderacom, however, those firms actually present potential synergies.

“InfiniBand is a big space, and it?s new, so there?s room for everyone so far,” Crudele said.

For example, Banderacom currently shares its laboratories with Austin Ventures portfolio-mate Lane 15 Software Inc., a start-up software company that?s also active in the InfiniBand space. Additionally, Banderacom has also partnered with publicly traded embedded operating systems developer Wind River Systems Inc. and strategic investor QLogic.

Bandercom?s technology essentially concentrates on solving problems in the first 50 feet of a wired Internet connection in an effort to unclog Web congestion and help manage the explosive demand for bandwidth from consumers and corporations. In other words, instead of having all the connectivity tied up inside one server, Banderacom enables network connections from as much as 50 feet away.

As the company is still in its very early stages, its latest infusion will be dedicated to bolstering its research and development activities, as well as finishing its first product and developing several others, Crudele said. It also plans to add marketing and sales employees to its 70-person payroll.

Founded in 1999, Banderacom?s last trip to the private equity market was last August, when it closed on a $9 million Series A deal.

Robyn Kurdek can be contacted at: Robyn