VC Watch

VENICE, Calif. -- Nearly $4.1 billion of venture capital was invested in 457 private U.S.-based companies in the third quarter of 2003, according to a newsletter from investment banking firm Growththink Securities.

Among the U.S.-funded companies included NanoNexus Inc. and Quantum Leap Packaging Inc. NanoNexus is developing semiconductor connector technology, while Quantum Leap Packaging is devising new materials for packaging. In addition, IQE, a wafer maker in the United Kingdom, received new funding.

In the United States, the overall VC funding for most segments remained steady from the previous quarter, according to Venice-based Growthink. During the period, the venture capitalists mainly invested in pharmaceutical and medical device companies focused on diagnosing and curing cancer, and software companies focused on curtailing spam.

The Bay Area in California continued to lead the nation in venture capital funding, receiving over 31.8 percent of the total dollars invested, according to the report. The Bay Area was home to the largest number of funded ventures (125), including six that raised rounds of $40 million or more.

The connectivity sector, which includes networking ventures, semiconductor companies, broadband and telecom companies, and wireless software and infrastructure providers, raised over one-third of the capital invested. An optical networking company, Infinera, led the sector followed by Fiberlink and BlueArc..

Fiberlink, Blue Bell, Pa., which raised $50 million from Technology Crossover Ventures, offers a full range of Internet-based communication services, including global remote access, and site-to-site LAN-based VPNs. Meanwhile, San Jose-based BlueArc, which provides network attached storage solutions, secured $47 million in a round led by Meritech Capital Partners. Since the company's founding in 1998, BlueArc has secured over $140 million in funding.

Healthcare remained the hottest sector, posting yet another quarter-to-quarter increase in funding. Some 124 healthcare ventures raised $1.3 billion, led by a $115 million investment in Reliant Pharmaceuticals of Liberty Corner, N.J. Reliant Pharmaceuticals markets branded, patent-protected pharmaceutical products to primary care and targeted specialty physicians.

New England companies raised 14 percent of the nation's total, led by GenPath Pharmaceuticals and Therion Biologics. GenPath, which raised $42.7 million, develops drugs that target gene products for curing cancers. Therion Biologics, which develops therapeutic vaccines for cancer and preventive vaccines for AIDS, raised $39 million.

Wales wafer maker raises funds

IQE, a supplier of wafers to the semiconductor industry with facilities in Wales and Pennsylvania, has raised £18.75 million (about US$31.4 million) through a placement of shares arranged and underwritten by Evolution Beeson Gregory.

Drew Nelson, IQE's chief executive officer, said: "As detailed in our 2003 interim results, visibility throughout the semiconductor industry remains poor. However, against this backdrop, we had anticipated some tangible signs of progress in Q4."

Within the last two weeks, two major Asia-Pacific customers for wafers for optical storage applications (both CD and DVD) have placed orders with IQE Europe for initial pilot production quantities and have indicated production ramp through 2004. Although these are unlikely to have an impact during the remainder of 2003, they are expected to have a material impact in 2004.

Other qualifications continue with a broad range of customers across several new wafer products serving the markets for CD and DVD optical storage, high power industrial lasers, high brightness LEDs, HBT wafers and vertical cavity surface emitting lasers (VCSELs).

Quantum Leap makes leap

Startup Quantum Leap Packaging is quietly moving into the qualification stage with its first product--a liquid crystal polymer (LCP) packaging technology said to replace traditional ceramic and metal materials.

To propel the development of its technology, Quantum Leap has received $3.5 million in Series A financing from Battery Ventures. As part of the investment, Battery Venture's Morgan Jones has joined the company's board.

Quantum Leap will use the investment to support its product development and business initiatives, said Mike Zimmerman, a 15-year veteran of Bell Laboratories, who is the founder and chief technology officer of the company. The Wilmington-based company was founded in January of 2003.

The company's technology is said to replace expensive ceramic and metal packaging materials and provides significant advantages in thermal and electrical performance. Quantum Leap's packaging solutions are designed for high-growth applications, including RF transistors, image sensors, vision packages, MEMs devices, semiconductors and fiber optic modules.

The startup claims to be the world's first company to deploy liquid crystal polymer in production for chip-packaging applications. "It's been tried before, but the technology has been difficult," Zimmerman said.

The company's technology is "100 percent crystal in solid and liquid form," he said. As a result, it has better electrical performances and tighter tolerances than traditional ceramic and metal materials, he told Silicon Strategies.

"The assembly and packaging of components has become a key element of the manufacturing process," he said. "Manufacturers are not only seeking more efficient packages that can perform the traditional functions of the package--protecting, powering, and interconnecting--but want them at a lower cost and comparable or better performance."

Its technology does not require new backend equipment. Quantum Leap is qualifying its technology with customers. Product shipments will begin "sometime next year," he added.

Semi connectors

Meanwhile, NanoNexus, a developer of semiconductor connector technologies, has secured $15 million in private equity and debt financing. The Series C $14 million in funding was led by Rustic Canyon Partners along with new investors Hunt Ventures, Pacifica Fund and Finaventures, and existing investors Idanta Partners, KT Venture Group, Compass Technology Partners, 2M Technology Investors and Goff Moore Strategic Investors.

Michael Kim, a partner at Rustic Canyon, has joined the NanoNexus' board. The Series C round closed in March 2003. The company recently closed a $1 million equipment loan line with Pentech Financial Services Inc., a provider of venture debt financing.

NanoNexus is leading the development of the industry's first self-assembled 3D MEMS structures manufactured using standard semiconductor fabrication techniques. NanoNexus is commercializing semiconductor connector technologies with higher performance and reliability at lower cost and shorter cycle time-to-delivery than competing technologies.

In a statement, Frank Swiatowiec, CEO of NanoNexus said, "With NanoNexus solutions, fabs and foundries can lower the cost of test and increase the revenue ramp for each circuit design. Major semiconductor manufacturers around the world are qualifying the company's initial products."

Colin Holland is an editor for EETimesUK. EETimesUK and Silicon Strategies are published by CMP Media.