Equipe Bands Together $40M

With a carrier-grade data switch poised for commercial release next quarter, Equipe Communications recently raised a $40 million Series C round designed to lengthen the company’s financial runway to cash flow positive, a milestone it hopes to achieve sometime within the next two years. To date, the Acton, Mass.-based firm has raised $103 million in venture financing.

With mostly East Coast VC firms on its existing investor roster, Equipe this time decided to court Sand Hill Road stalwart Sequoia Capital Partners, which ended up leading the transaction. “Sequoia is a tier-one VC firm in our market space, the networking space,” says Bob Sullebarger, Equipe’s vice president of marketing. “They were a key investor in companies like 3Com… Apple and Atari. They bring [a wealth] of experience to the table.”

Other new investors in the round included Silicon Valley BancVentures and publicly traded optical networking giant CIENA Corp., which came in as a strategic financier. Inside investors Matrix Partners, North Bridge Venture Partners, Battery Ventures and Pequot Capital Partners also re-upped this time around, along with Palo Alto, Calif.-based Worldview Technology Partners, which until this round had been Equipe’s token West Coast VC.

This was a down round for the company, Sullebarger says, although he declined to disclose an exact figure. “When we did the second round, the Nasdaq was at 5,000,” he adds. “So no, we didn’t achieve as high a [post-money] valuation as we had on the second round. It was a market-based pricing.”

Despite the valuation hit, Equipe may be right on the money with its signature product offering, the Equipe 3200 (E3200). Essentially, the company has developed a data switching platform for incumbent local exchange carriers such as Verizon, SBC Communications, BellSouth and Qwest Communications. It also will target inter-exchange carriers like AT&T, Worldcom and Sprint. Sullebarger declined to comment on whether Equipe has actually signed on any of these telecom big guns as customers, however.

While the general perception has been that carriers’ data networks were going to rapidly migrate to an all-IP architecture, the reality is, there hasn’t been much of a business case to do so, Sullebarger says. To that end, the flood of capital that once flowed into the space has dwindled to a trickle as the overall movement to an all-IP network has slowed.

What makes Equipe so attractive to investors is that it offers a product designed to simply drop into the existing network without disrupting its basic architecture or the management systems supporting the network. Additionally, it allows carriers to transition their networks to an all-IP architecture should it make sense for them to do so in the future, Sullebarger says.

Once E3200 has passed muster in customer trials, which are slated to take place over the next few weeks, it will be ready for release. As such, the company is expected to start generating revenue as early as the second quarter.

Contact Robyn Kurdek at: Robyn.Kurdek@tfn.com