LVL7 Systems expects to close on its first round of venture financing by the end of the first quarter – a milestone that could herald an improvement in the beleaguered telecommunications sector.
Cary-based LVL7 (pronounced “Level Seven”), which develops and sells network processing software for use in telecom switches, routers and other gear, is nearing completion of its round of $10 million to $15 million in financing from several undisclosed venture capital firms. LVL7 management is confident that the company’s stable performance in 2001, coupled with a business plan that calls for achieving profitability in the fourth quarter of this year, will result in the company’s initial VC funding.
“We hit our targets last year in a year when everyone missed their expectations,” says Kishore Jotwani, LVL7’s vice president of marketing. Jotwani and CEO Ernie Baker won’t disclose revenues, but both say the company expects sales to increase between five and six times over 2001 revenue.
LVL7, with 58 employees, obtained both its initial funding and a second round from Accton Technology Corp. in Taiwan, Applied Micro Circuits Corp. (AMCC) in San Diego, and a private investor in the Triangle.
Seeking More Partners
To meet its 2002 goals, the company must extend its streak of signing up major semiconductor manufacturers as partners. The latest was Vitesse Semiconductor Corp., which in November began making LVL7’s software available to drive one of its major lines of network processor units.
LVL7 partners with telecom chipmakers to lend credibility to its efforts to sell network-processing software to telecom equipment makers. Equipment manufacturers such as Nortel Networks and Cisco Systems prefer to use network-processing software that’s easily compatible with the chips they’ve already decided to use in their equipment.
Major semiconductor targets for LVL7 include Intel Corp. and Motorola Corp. – two of the leading players in the telecom chip market. Besides Vitesse, the company has existing relationships with AMCC and SwitchCore.
Fastpath to Success?
LVL7’s principal software product is Fastpath, a complex software suite – with more than 1 million lines of code – that took 18 months to develop. Rather than develop new products in 2002, the company is planning upgrades and enhancements to Fastpath, the first of which is due in February.
In the midst of a dismal year for the telecom sector, LVL7 began to close deals in the last quarter of 2001, following the launch of Fastpath. The product’s untimely release date – Sept. 11 at the Networld+Interop show – apparently didn’t hamper sales or efforts to win partner relationships with chipmakers. On the afternoon of the terrorist attacks, N+I shut down, and LVL7 staffers packed up and made the drive back to the Triangle from Atlanta.
“2001 was not a critical year for us to go out and sell to customers,” says Baker, a former executive at IBM Corp. and Accton. “It was a tough year, but it made our relationships with our technology partners stronger.”