Montreal-based Simpler Networks completed a $15 million recapitalization last week, after burning through $27 million of venture capital in its five-year history.
Led by Boston-based Highland Capital Partners and Kodiak Venture Partners, the deal also included investors from the company’s previous rounds of financing, BCE Capital, Solidarity Fund QFL and Innovatech Montreal.
Simpler Networks builds MEMs-based switches so network engineers can remotely install and delete broadband services.
Back in 1999 when the business was founded, it was developing technology for the competitive local exchange carrier market.
When that industry collapsed in 2001 and 2002, so too did the company’s business.
But Simpler Networks has reinvented itself, tinkering with its technology to suit the needs of the incumbent local exchange carrier market. The effort, which began last year, represents, “a total reorientation of the company,” says Natalie Vinette, a company spokeswoman.
With a new direction come new investors and new directors to lead the effort. While its original management team – President Mike Perrault and CTO Stephane Menard – is still in place, its board, though, has been rearranged to reflect the company’s new focus.
The new investors are each taking a seat on the company’s board, represented by Jean-Luc Abaziou of Highland Capital and Dave Furneaux of Kodiak Ventures.
Simpler Networks in just one of dozens of companies to be forced into a financial restructuring in recent months.
Last week, Austin-based semiconductor developer NetEffect Inc. announced the close of a $22 million recap after five years in business with $66 million of venture capital behind it.
Also, CargoTech, a San Diego-based company whose packaging can be used to ship cold food on long flights, completed a $2.1 million recap last month.
As venture capitalists scour through their portfolios, when they find a floundering company whose technology or business plan is still viable, they’ll bring in new investors to recapitalize the company, often times at a punishing valuation to the company’s founding investors.
For come companies, it’s a choice between accepting a negative term sheet or shutting down completely. A recap is not all bad, though. It’s a way of breathing new energy into a fledgling startup.
Simpler Networks plans to debut its new technology next month at an industry conference. It will begin field trials with carriers and potential customers next year.