Movaz Scores $60M More

Movaz Networks Inc., a startup specializing in optical networking gear for metro networks, has added $60 million in funding to the $100 million it's already raised. The round, to be announced tomorrow, includes $50 million in equity funding and $10 million in non-equity funding, the company says.

The round is led by a group of previous investors in Movaz, including round leaders Meritech Capital Partners and Oak Investment Partners, along with Anschutz Investment Co., GATX Ventures Inc., Menlo Ventures, Silicon Valley BancVentures, and WorldView Technology Partners.

There's also new investment from Telus Ventures, the venture capital arm of Telus, one of the top two carriers in Canada -- the other being Bell Canada Enterprises (NYSE/Toronto: BCE).

The size of the round is bound to raise eyebrows, and that's just what CEO Bijan Khosravi wants it to do. "This round is designed to make us fully funded and bring us to breakeven by next year," he says. "This gives us a strong balance sheet we can present to service providers."

Khosravi admits this is a "down" round, in which the company has reorganized its capital structure, diluting previous equity stakes. Khosravi also makes no secret that he'd like to use some spare shares to sweeten the deal for business providers. As a result of this financing arrangement, he has another $10 million in equity still available, waiting to be taken up by strategic partners, "such as service providers."

It's no surprise the brash Khosravi's casting a line. It's those service providers he's eager to impress that are key to the future of Movaz, which has been shipping its central office switches for several months and has an optical crossconnect in the works (see Movaz Makes Its Milestones and Movaz Sees 3D).

Movaz may have snagged a live one that it needs to reel in. The size of the round indicates that Movaz may have gotten close to a large carrier customer, only to have them suspiciously eye the startup's balance sheet.

"Usually, rounds this big mean a company has some business coming in from a key customer," says Frank Dzubeck, president of Communications Network Architects (no Web site). But he notes there may be strings or conditions attached. It's not unheard of for investors to pull out of a deal if products don't meet specs or perform as planned, he says.

So who's the carrier behind the curtain? Khosravi isn't saying anything beyond that Movaz did "several million" dollars worth of business last quarter with a handful of carriers. But so far, no big names have surfaced.

The participation of Canada's Telus in this funding round is intriguing. Telus Ventures is a relatively new fund, established in 2001 with US$100 million from parent company Telus. According to its Web site, the fund invests strictly with the carrier's business in mind: "TELUS Ventures is not an opportunistic fund but a very focused corporate fund set up to secure strategic growth options for our business units," the site proclaims. And there's more: "Through our Brand And Technology Agreement with [Verizon Communications Inc. (NYSE: VZ)], who have roughly a 26% equity stake in TELUS, we are also in a position to potentially open a door to targeted US domestic and international markets."

Regardless of who may or may not take up Movaz on its offer of equity, the startup plans a suitable venue for any possible pairings in Atlanta: a 40-by-50-foot booth, in which the vendor will be demonstrating its central office switches. Movaz also plans seminars on various topics.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com For more information on Supercomm 2002, please visit: Supercomm Special
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William F. Letcher 12/4/2012 | 10:29:32 PM
re: Movaz Scores $60M More (no explanation necessary)
geof hollingsworth 12/4/2012 | 10:29:31 PM
re: Movaz Scores $60M More Yeah, what do those Anshutz guys know about fiber? And what was Menlo thinking when they sold Xros to Nortel-should have held onto that jewel. Same with Oak selling Qtera to Nortel, or putting money into Tellium. And don't even get me started on Meritech and Corvis...

I don't think embarrassing is the right word-these guys clearly have been investing in optical throughout the bubble and during that time did very well. But lately, well that's a different story. Amazing is my word for it-what do they see that we are missing?
Light-bulb 12/4/2012 | 10:29:31 PM
re: Movaz Scores $60M More The poor employees... The dilution must be huge... The employees that work their rears off day/night to bring a product to market, only to see their equity erode away before their eyes. Isn't this their third round of funding?
flanker 12/4/2012 | 10:29:31 PM
re: Movaz Scores $60M More This round and the amount invested suggest that second tier investors with no experience in optical networking flops are stepping up.

It's embarrassing.
jshuler 12/4/2012 | 10:29:30 PM
re: Movaz Scores $60M More I hope they are seeing something. I've got buddies at Movaz, and I'd love to see them succeed. Besides, our whole industry needs a shot in the arm -- morphine, if nothing else :)
BBBoa 12/4/2012 | 10:29:29 PM
re: Movaz Scores $60M More Two things:

1. Yes the dilution is aweful - perhaps even 100%. It sounds like they did a wash out round which would eliminate any previous equity stake. The good news, the current employees and investors get recapitalized when a new pool of stock is formed after a wash out. Former employees and investors get squat.

2. The investors is this round are highly experienced and could not be confused with a "second-tier" firm - where have you been "flanker"? (Still unemployed and bitter is my guess)

It's good to see Movaz get the $$$. This bodes well for the industry and it's good to see some confidence from the investment community.
jssreenath 12/4/2012 | 10:29:28 PM
re: Movaz Scores $60M More Getting washed out is a concern, but more importantly, the employees still have jobs. Lets see; 100 million options of a company that runs out of money, or a job that pays well with new options and vesting schedule? Hmmm, I would take the job and the new options every time.
rjmcmahon 12/4/2012 | 10:29:28 PM
re: Movaz Scores $60M More Amazing is my word for it-what do they see that we are missing?

rjmcmahon 12/4/2012 | 10:29:27 PM
re: Movaz Scores $60M More I'm normally a big fan of brevity, but your response has me stumped, rj-can you elaborate?

Are there enough traders sitting on the sideline impatiently waiting for an incumbant announcement saying they will start buying new technology from some new company?

Building a cash warchest seems required before any incumbant would buy from a young technology provider. Traders might believe a warchest is vote of confidence by control investors.
geof hollingsworth 12/4/2012 | 10:29:27 PM
re: Movaz Scores $60M More I'm normally a big fan of brevity, but your response has me stumped, rj-can you elaborate?
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