Investors Bounce $21M Into Elastic

Backed by the belief that an exclusive technology named Etherloop will help Elastic Networks Inc. succeed within the crowded DSL marketplace, seven venture sources recently invested a total of $21 million in the next generation telecom company.

The second-round funding was led by MF Private Capital with a $7.5 million investment. Additional participants included Williams, Jones & Associates, ComVentures, Wolfson Equities and existing Series A investors Pequot Capital Management and Texas Instruments Inc.

The issuer is a private company that was spun off from Nortel Networks in May 1999 and has been operating as an autonomous entity ever since. Its trademarked Etherloop system is designed to provide high-speed access to both voice and data over standard twisted copper phone lines. In other words, customers who desire to use Etherloop will generally not need to suffer the aggravation or costly bills often associated with additional wiring.

“There are other companies targeting the same space, but it is my understanding that in most cases the other types of technologies require the copper lines to first be conditioned so they can transmit data as well as voice,” said Laurie Falconer, an analyst at Telechoice Inc.

“Elastic recognizes that the technology is changing almost monthly,” added Steve Brackett, managing director at MF Private Capital. “But this company, with its strong senior management and Nortel connections, is fully capable of staying ahead of the curve, although their current version of the technology is robust enough to grab immediate market share.”

While announcing the successful completion of its funding round, Elastic Networks also said in a prepared statement that it had added a pair of new members to its executive team. Michael VanPatten, formerly a senior vice president at ViaGate Technologies Inc., was appointed senior vice president of business development at Elastic. Also, Robert Gallagher was named vice president of engineering, a position comparable to the one he previously held at ADC Telecommunications Inc.