MontaVista Scales $28M Peak

Looking to garner enough capital to fully fund its business plan, MontaVista Software Inc. announced last week it had taken in $28 million in a Series D financing. The nearly two-year-old company has now raised a total of more than $60 million.

Existing backer U.S. Venture Partners (USVP) led the round, which included new investors IBM and Sony Corp., as well as previous players Alloy Ventures, Intel Capital, RRE Ventures and WR Hambrecht + Co.

The company builds, packages and sells development environments for engineers creating Linux-based operating systems for embedded systems, like the microchips in digital televisions, communications routers and switches, explained Jim Ready, chief executive officer at MontaVista.

The embedded systems market is quite fragmented, with some companies buying software solutions from proprietary providers and others developing their own solutions, which is a time-intensive and costly process, Ready noted. Linux, which has a lot of support in the engineering community, is open, standard and scalable, which makes it the perfect solution for the embedded systems marketplace, he noted.

“Today everyone can use Linux and that is the bet, that an everywhere operating system based on Linux can be very big,” Ready added.

The company’s flagship product, MontaVista Linux, is a superior solution for companies looking for an embedded software solution, said Stuart Phillips, a general partner at USVP, because by providing client support and testing, the company will improve the time to market for businesses that have previously been developing their own software systems alone. Moreover, MontaVista does not charge a per-product royalty like existing proprietary embedded systems software companies, he added.

MontaVista launched this latest round of financing specifically to seek corporate investors, and had been targeting IBM as a backer for more than a year, Ready said.

“For someone you go to market with to invest in you… puts you in a special category and opens doors for you within that company and makes your relationship a little more official,” he said.

The company will use this latest infusion of capital to meet the day-to-day cash needs of its business. MontaVista plans to achieve profitability in mid- to late 2003. The company has no plans for any additional rounds of private financing and will continue to build out its business, waiting for the right exit environment for an initial public offering, Ready said.

Alistair Christopher can be contacted