LVL7 Rakes in $12.5M in Series A

One year after the launch of a software package used by network infrastructure developers to accelerate and streamline the design process, LVL7 Systems of Cary, N.C. has secured $12.5 million in its first round of institutional financing.

The deal will close in two tranches: Investors have already armed the company with $8.5 million in venture capital, but if the company runs short on cash before it breaks even, its venture backers will pump an additional $4 million into its coffers.

“The $4 million is a safety net for us,” says Ernest Baker, the company’s president and co-founder. “If the market continues to go soft and we need more cash, this makes it very simple for us.” Still, he adds, the $8.5 million the company already secured should fund its operations until the middle of next year, when the company plans to hit profitability. LVL7 Systems has no plans for additional rounds of venture financing.

Gabriel Venture Partners of Redwood Shores, Calif., and H.I.G. Ventures of Atlanta co-led the round. They were joined at the table by Accton Technology Corp., a Taiwanese communications equipment manufacturer, and individual investors like Neal Hunter, chairman of semiconductor equipment maker Cree Inc. The company raised $10 million in two rounds of seed financing that date back to 2000.

Baker and Erik Dixon, a co-founder and vice president for LVL7’s business development department, are IBM Corp. veterans who formed LVL7 in November 1999 to create a software platform to help network equipment vendors and systems integrators reduce development costs and improve productivity in building Ethernet products. The company has partnered with silicon vendors like Intel and Vitesse to sell its software to companies like Passive optical network developer Quantum Bridge of Andover, Mass., and Hillsboro, Ore.-based RadiSys Corp., a developer of communications systems.

With 60 employees on its roster, LVL7 plans to use the funding to add another dozen employees to its team over the next six to nine months, mostly in sales and marketinge on the West Coast and in Asia. It will also add to its software development team in order to add features to its software for developers of metro broadband networks and wireless Internet access providers.

Contact Carolina Braunschweig