Brix Networks Cements $22M Series C Deal

After three trips to the private equity market, Brix Networks is no stranger to the fund-raising process. Still, its senior executives, who had wrapped up the company?s first two offerings in a matter of hours, might have experienced a slight case of culture shock this time around as it took them approximately five months to seal Brix Networks? Series C deal.

“We did our first round over a weekend with [a few] phone calls,” recalled Tom Pincince, the company?s president and chief executive. “Our second round was done around a board table in about 45 minutes.”

It?s not that Brix Networks had trouble attracting third round investors. Quite the contrary, actually. But with many VCs striving to put the dotcom doldrums behind them, cash isn?t nearly as easy to come by as it was a year ago, and the due diligence process now sometimes takes months as opposed to mere days ? two dramatic changes that could be quite surprising for a company that had grown accustomed to an almost-automatic cash flow.

Still, the company managed to draw $22 million in venture financing in a deal led by first-time investor Fidelity Ventures. New backers Partech Capital and Star Ventures also came on board, along with repeat players Charles River Ventures and ComVentures.

“This combination of new investors gave us good visibility in the public marketplace and an international flair we hadn?t had in other rounds,” Pincince said, referring to Paris-based Partech Capital and Munich-based Star Ventures.

This latest infusion will likely extend the company?s cash runway until it achieves profitability sometime in the latter half of 2002, Pincince said. At that time, Brix Networks plans to “pop its head up” and evaluate the status of the public markets, he added. The company has raised a total of $47 million in venture capital since its inception 21 months ago.

“We?re looking at [companies] that are taking the cost out of operating networks, the ones that are evolutionary, not revolutionary,” said Jim McLean, a partner with ComVentures, which invests almost exclusively in communications deals.

Although it officially closed the round in February, Brix Networks held off on issuing a formal announcement until it signed on new customers Level 3 Communications and e^deltacom, a division of ITC^DeltaCom Inc. So far, the company has amassed six paying clients, although not all have been publicly announced yet.

“Level 3 and e^deltacom represent the two classes of customers we target,” McLean said. “Level 3 is an established tier-one provider looking to differentiate itself in the marketplace, and e^deltacom is that rare, emerging service provider that actually has the infrastructure to drive revenue. Both are well-capitalized companies with assets they can actually put to work. We don?t see a lot of CLECs.”

Fulfilling The Need For Speed

At a time when most communications service suppliers are down on their luck due to a sweeping downdraft in the telecommunications carrier community, Brix Networks is cracking open a slightly different niche for itself by offering its customers the ability to not only monitor Internet performance, but also prove to their corporate clients that they?re getting what their paying for.

“When [corporate customers] buy Internet services today, it?s like buying a car without a dashboard ? they have no idea how fast it [goes],” Pincince explained. “Brix Networks offers tools to show them how the service is performing and, if there are issues, how to fix them.”

At least for now, Brix Networks seems to have cornered what Pincince estimated is a $1.7 billion market for service verification. To be sure, companies such as telecom giant Lucent, UK-based network manager Micromuse and optical and electronics measurement provider Agilent Technologies are beginning to encroach on its territory. But, so far, Brix Networks hasn?t felt the heat from the start-up community, Pincince said.

“We have the technology lead in a market where technology still matters,” he noted. “We?re [not fighting] a brand war right now.”

Still, how long the company can retain that comfortable lead is anyone?s guess. “They have to execute to keep their leadership position, because it?s always easier to lose [the lead] than maintain it,” ComVentures? McLean said.

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