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By zeroing in on the major telecom carriers' critical need for cost savings, startup Polaris Networks Inc. found an anchor for its next-generation optical transport switching systems and beat its own financing targets - raising $52 million in an oversubscribed Series B round set to be announced today.
The San Jose, Calif., company originally aimed for $35 million when it began to knock on investors' doors in April 2001. By December it had closed on $33 million, according to chief executive and founder Ray Kao. But as more investors wanted in, Polaris took $9 million more in equity from new investors and $10 million in lease financing.
The post-investment valuation - at $100 million to $150 million - was flat. But nowadays, Kao said, it's an achievement to keep the same terms as its $22 million Series A round had in August 2000, when valuations in optical networking were still relatively buoyant.
"It's essentially a pretty ugly environment with a lot of washout rounds and very low valuations on Series B rounds," said Christopher Cook, senior vice president of global sales and business development. "We've heard an astonishing number of B rounds are not even getting funded."
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