DCL Tests Positive for Growth

Data Connection Ltd. (DCL) got funding to accelerate growth and expand beyond its traditional customer base.

Data Connection, parent company of softswitch specialist Metaswitch Networks , received an infusion of capital from Francisco Partners and Sequoia Capital that it says will help it to capture opportunities in the market that it wouldn't otherwise be able to fund. (See Data Connection Funded.)

The investment is a bit of a departure for DCL. The company has a long history of being self-financed and employee-owned, with 26 years of profitable growth, says MetaSwitch COO John Lazar.

Lazar stressed that the capital did not come out of necessity, but that certain opportunities available in the market led the company to consider a number of strategic options for raising capital.

"We don't need to take on this capital, but when you have a number of opportunities in front of you, you have to think about your ability to go out and invest. It's just about limits. We can go after a few more of these opportunities now," Lazar says.

One such opportunity is the company's expansion beyond its traditional customer base in North America to pursue business in Europe and CALA (Caribbean and Latin America). (See MetaSwitch Eyes CALA.)

The company will also continue to invest in research and development, particularly in the MetaSwitch softswitch and MetaSphere service delivery platform (SDP) product lines, Lazar says. (See MetaSwitch Intros SDP.)

"We already have substantial R&D investment. This [financing] gives us the added impetus and capacity to continue to invest in the MetaSwitch portfolio we have already."

Morgan Keegan analyst Simon Leopold says the investment is the classic case of an employee-owned firm looking to raise capital to grow more quickly than it would otherwise be able to.

"Rather than building up a cash base and growing slowly, they see opportunities now and want to be able to seize them while they are there," Leopold says.

The analyst believes that of the options available, venture funding was probably preferable to a public offering in the current market. "No one wants to do an IPO in this sort of market, which is why they did this sort of cash raising instead," he says.

— Ryan Lawler, Reporter, Light Reading