Phonetic Directs $37.5 Million Deal

Already armed with a diverse array of enterprise-driven customers like Microsoft, Atlantic Records and Morgan Stanley Dean Witter, voice-driven directory access provider Phonetic Systems Ltd. has now set its sights on tapping the vast carrier-class and wireless service provider markets. And now it has plenty of cash on hand to buy the mallet.

Earlier this month, the Burlington, Mass.-based company secured $37.5 million in its third round of venture funding. The deal follows up last year?s $7.2 Series B deal and a $4 million seed round raised in 1997.

General Atlantic Partners led the most recent financing, and was joined by new investors Sonera Media Holdings BV and Aurum SBC Ventures, which is a joint investment vehicle of SBC Communications Inc. and the Aurec Group. Existing backers Polaris Venture Capital, Magnum Communications Fund, Formula Ventures, Evergreen Partners Management Ltd. and Sadot Research & Development Fund also participated.

“A major reason we originally invested in Phonetic [Systems] was the potential for entry into the carrier markets and mobile Internet markets,” said Moshe Levin, a partner with Polaris Venture Capital. “There is so much opportunity there and I think that bringing in an investor like General Atlantic and an industry leader like Sonera is really a major confirmation of the technology.”

More specifically, Phonetic Systems? technology is a speech recognition tool that enables access to large dynamic data sources such as directories via both wire lines and wireless devices. While there are, admittedly, a number of voice-driven services out there, the company believes that its ability to separate from existing embedded technologies helps set it apart.

“Our capability to get into database and directory files is what differentiates us,” said Mark Baltier, vice president and chief financial officer with Phonetic Systems. “Traditional speech recognition technology cannot scale to that level.”

Baltier added that he views the most recent funding round as a quasi-mezzanine deal, given that the new capital should be able to tide the company over for at least two years. He did not, however, rule out the possibility of bringing on additional strategic investment partners over the upcoming months.

Dan Primack can be contacted at Story Feedback.