With $17 million in seed and Series A funding under its belt, Entropic Communications set out to raise a Series B fund to take its upcoming lead product to market. Investors, along with founding president and CEO Itzhak Gurantz, agreed to bring on a new chief executive.
By early September, the company managed to net both. A $29 million Series B and a new CEO arrived by the end of summer.
Previous investors and Series A co-leaders Redpoint Ventures and CMEA Ventures co-led the round. New investors include Anthem Venture Partners, China Development Industrial Bank, Cisco Systems, Comcast Interactive Capital, Dow Employees’ Pension Plan, Intel Capital, Motorola and Panasonic. Returning investors include Liberty Associated Partners, Mission Ventures, Revolution Ventures, Time Warner and YAS Broadband Ventures. The round brings the company’s total raised to $46 million.
The company, which provides semiconductor products that enable broadband communication services, did not disclose the exact post-money valuation, which was over $50 million. Founding Redpoint Ventures Partner John Walecka says that valuation negotiations were complicated only because so many of the new investors were strategic investors. Redpoint Ventures invested at a pro-rata or slightly above pro-rata rate.
The funding will be used to roll out its first product at the beginning of 2004 and for further product development. The company has less than 50 employees, according to Walecka, but plans only a modest increase in headcount.
Patrick Henry began his tenure as the new president and CEO of Entropic in the beginning of September. Henry was most recently CEO of Pictos Technologies, a digital imaging device developer. He also served as CEO of LinCom Wireless and was a vice president and general manager with LSI Logic. Henry was recruited by a placement firm but knew the company and its founder from when he was as a senior vice president at C-Cube Microsystems and Gurantz was with Conexant Systems. Gurantz remains with the company as chairman and chief technical officer.
Walecka says he doesn’t see the need for any future fund-raising and that he expects the company to be profitable by sometime in 2005 after seeing product revenue by the second half of 2004.
“The biggest challenge was the technical challenge. But [Entropic has] been able to solve it and have a product with working parts,” says Walecka. “Because they have working parts they’ve been able to generate interest from a lot of strategic partners. Now we need to generate interest and transition that technology into a profitable business.”
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