Reva Racks Up $13.5M

Radio Frequency Identification (RFID) startup Reva Systems has chalked up $13.5 million in Series B funding from Cisco and SAP Ventures as the startup looks to expand its customer base.

The round, which also included existing investors North Bridge Venture Partners and Charles River Ventures, brings the startup's total funding to $20 million. Reva, Cisco, and SAP have also entered into an agreement to collaborate on RFID, which Ashley Stephenson, Reva's chairman, hopes will open doors.

"We want to grow the number of customers [that we have] and we want to grow the size of our installations within [existing] customers," he says, adding that the firm will use its Series B money to increase its workforce from around 35 to 50 and open offices in the Far East and Europe.

Reva's flagship product is the Tag Acquisition Processor (TAP), a one-rack-unit-high device that sits on a local area network (LAN) and draws information from RFID readers. The idea is that the device acts as a data filter, preventing back-end storage systems from being overloaded. (See Reva Taps Into RFID Data, Reva Unveils TAP , and Startup Raves on RFID.)

RFID works by using tags, on either a specific product or package, that emit radio signals. "Reader" devices pick up these signals, enabling the products to be tracked. Whereas previously, businesses relied on barcode readers to keep track of their wares, RFID technology does not require direct contact, or what is known as "line-of-sight" scanning.

Reva, however, has just a half dozen customers for its TAP devices. "The percentage of organizations on RFID is small," admits Stephenson, although he predicts that increasing volumes of data will be generated as more and more firms sign up for the technology.

The exec, however, would only confirm the identities of two Reva customers: AT&T and HP, which is using the TAP system in its factories to keep track of parts such as printer cartridges.

But despite the money now flowing into Reva, at least one analyst thinks users should beware of RFID. "It's over-hyped," says David O'Connell, senior analyst at Nucleus Research. "It's too expensive and there are too many kinks in the reading technology."

For O'Connell, RFID simply doesn't offer the return on investment to justify the expensive shift from barcode scanning. "You have got to rip out a lot of infrastructure and put a lot more infrastructure in," he says. "You're not going to have some sort of wireless nirvana... There's a lot of caution out there."

It is this caution, according to the analyst, that may have prompted Cisco and SAP to pump their cash into Reva. "They are willing to pay someone else to do [the RFID development work] and take the risk, rather than do it themselves," O'Connell opines.

The immaturity of this market is reflected in the fact that relatively few startups have targeted this space, although one software vendor, InSync, which links RFID data and enterprise resource planning (ERP) systems, recently chalked up a $7.5 million Series A round. (See RFID Software Ramps Up.)

And some big name firms, not to mention the U.S. Department of Defense, have already embraced RFID. U.K. retailer Marks & Spencer, for example, is trialing the technology in its stores. On the other side of the Atlantic, retail giant Wal-Mart, is expected to increase the scope its own RFID rollout from 500 to 1,000 stores by the end of this year.

The technology is also grabbing a toehold in some smaller organizations, from school districts and specialist retail firms to the Royal New Zealand Navy. (See More Users Signal RFID Intentions, RFID Reality Check, and Dutch Bookstore Rolls Out RFID.)

A number of software vendors, including IBM and BEA, are also fleshing out their RFID middleware portfolios at the moment. IBM has already adapted its WebSphere middleware to monitor RFID activity, and BEA nabbed startup ConnecTerrain an attempt to boost its own product line. (See Middleware Players Eye RFID and BEA Acquires ConnecTerra .)

— James Rogers, Senior Editor, Byte and Switch