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Diablo Connects with $15M
, 29 Juillet 2008 -
High-speed server and storage chip developer Diablo Technologies Inc. turned to insiders for a final cash infusion before commercially introducing its products, announcing Tuesday, July 29, the closing of a $15 million Series B round.
BDC Venture Capital, GTI Capital and Celtic House Venture Partners, all of Montreal, backed the investment in the Gatineau, Quebec-based company on the expectation that volume shipping and revenue generation will enable it to return to the capital markets for new investors as soon as September. The new money will support the completion and the production of mixed-signal interconnect chips for servers and switches that require high speed, low power and low latency.
Roger Jenkins, a managing partner with GTI Capital, said investors opted to keep the deal among insiders, given the difficulty in funding prerevenue semiconductor companies, but with the expectation that the market will give the company a strong valuation after it delivers products. Jenkins said insiders' support of the company is demonstrated by GTI stretching its $6 million investment limit for the first time, boosting its total investment in Diablo to $10 million.
"It's still a revenue-free company, and people like to see real stuff, but since we are just a few months away from shipping, we thought it would be a waste of time to undertake a funding round with new investors," Jenkins said. "But we were all totally committed, and it was easy to raise the money; we put up the $10 million for the first time in our history because we think they are poised to do great things."
Diablo was formed in 2002 to develop so-called SerDes, or serializer-deserializer, chips that convert data between serial data and parallel interfaces in high-powered servers and switching equipment. The products employ both analog and digital functions, and while high speeds have been easily attainable for some time, the industry continually has striven to reduce the power consumed by these chips.
While Diablo expects to introduce its first chips within the next few months, the company also will use the new capital for development of additional products in late 2009 for larger consumer-oriented markets.
Jenkins said he initially looked at the company when BDC participated in its seed round but held off until products were in development three years ago and its design approach was well established. Jenkins said that server giant IBM Corp. of Armonk, N.Y., is a limited partner in GTI and participated in due diligence, endorsing Diablo's approach to solving power consumption issues.
"Low power is what we were betting on, and that's really the test for the next wave of high-speed server chips," Jenkins said. "So far, they have met all their milestones with Swiss watch accuracy."
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