Optical access systems co Flexlight raises $17m

US fund St. Paul Venture Capital led the round, joined by Accel Partners and Applied Materials Ventures.

Israeli start-up FlexLight Networks , has completed its third financing round, raising $17 million. US fund St. Paul Venture Capital led the round, joined by new investors Accel Partners and Applied Materials Ventures, and current investors Concord Ventures and Coral Ventures. Flexlight has raised a total of $29 million to date. Following the round, St. Paul general partner and former ADC CEO Bill Cadogan, Accel general partner Joe Golden, and Applied Materials Ventures general partner Fahri Diner joined the FlexLight board of directors.

The investment was Applied Materials’ second in Israel, since beginning its operations in Israel in late 2001. Earlier this year, the company participated in M-Stream’s seed round, together with US chip manufacturer Broadcom (Nasdaq: BRCM).

Concord Ventures general partner Avi Domoshevitzki said the money raised would be used to expand development and marketing of FlexLight’s products. He added, “It’s hard to sell to carriers now without strong backing. None of them will enter a strategic partnership if they suspect we might not be in the market in another two years.”

FlexLight develops gigabit passive optical networking (GPON) solutions, which enable communications providers in a metropolitan area (rings of optical networks surrounding large cities) to also provide solutions for small and medium-sized businesses far away from the city centers. The technology supports most existing protocols, including the popular SONET protocol, thereby enabling providers to connect customers to optical networks, without adding support for IP.

FlexLight’s GPON platform enables communications providers to connect subscribers with regional call centers and optical centers installed in office and residential buildings. In addition, it includes a network management system, which monitors information traffic and allocates broadband.

The GPON standard, which the International Telecommunications Union approved at the end of last year, competes with the Ethernet passive optical networking (EPON) standard, which uses Ethernet protocol to connect optical networks. Israeli start-up Passave develops EPON chips.

Domoshevitzki says, “GPON is FlexLight’s invention. It is the only company today that has put out a GPON product. Without sales personnel, we already have one customer in Singapore, and the product is currently undergoing trials with 11 companies (including France Telecom, D.Y.). I predict some of these will become customers by the end of this year.”

FlexLight experienced difficulties last year, reflected by the cancellation of a planned $15 million financing round, among other things. Domoshevitzki asserts that the company is now befitting from increasing demand for its products, “mostly because we’ve become a global standard.” Concerning anticipated competition from Alcatel (NYSE: ALA), which announced that it would develop GPON systems, Domoshevitz said, “They may be aggressive competitors, but that confirms our market. It will also push all the telecommunications equipment manufacturers into the field.”

Yosi Arul, CTO Oren Marmur, and Hezi Lapid, and Joseph Arol, all former ECI Telecom(Nasdaq:ECIL) employees, founded FlexLight in September 2000. The company soon completed an $8.5 million seed round from Concord ($5 million) and Coral, which invested another $3 million at the end of last year. The company also received a $1.5 million grant from the Ministry of Industry, Trade, and Labor Chief Scientist about a year ago. FlexLight has 35 employees at its Kfar Sava development center and its main offices in Atlanta in the US.

Published by Globes [online] -l www.globes.co.il - on July 17, 2003

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