DragonWave Inc. has ventured into the capital raising markets again, securing
$3.6 million in debt financing from MM Venture Partners.
The company, which is chaired and largely funded by Terry Matthews, raised
$14 million in August 2001 and $12 million in February 2000. The company's chief
financial officer Ron Blair says the $3.6 million will be put toward operating
Like Innovance Networks, Tropic Networks, Solidum Systems and Zucotto Wireless
- all of which received debt financing from MMVP last year - DragonWave chose
debt financing as a way to avoid giving away any more equity.
"Typically, if you can do it that way, you'll take it. That way you're getting
the capital without giving up the dilution," says Blair.
Despite closing $14 million in August, Blair any time is a good time to raise
money. "With the capital markets the way they are, it's prudent to keep the
flow of cash coming into the company," he says.
DragonWave operates in the wireless broadband market and is challenging fibre-optic
products as the preferred technology path for the last mile. The company plans
to supplant fibre optics by offering a more affordable alternative for broadband
service providers to expand their networks.
Employing 75 people, DragonWave is shipping product and focusing on marketing
MMVP partner Ron Patterson says the deal interested him for a couple of reasons.
"First, they have breakthrough technology and the other thing we liked is the
team has very strong roots in Newbridge," he says.
Patterson also was comforted by the fact DragonWave has attracted considerable
cash from Matthews' investment vehicle Celtic House International. (DragonWave's
other existing investors include Venture Coaches, VentureLink Capital Corp.,
I.G. Investment Management and EDB Ventures Pte Ltd.)
"The existing partners are quite strong. We have a lot of respect for Celtic
House," he says.
Typically, debt financing buys a company more time to accomplish the necessary
milestones before it can go out and attract a major round of equity financing
at a higher valuation.
The usual deal is $3 million to $4 million, some in equity but mostly in the
form of a loan repayable over three years in regular installments of principal
and interest. Warrants are usually part of the formula, giving investors like
MMVP access to further equity at an opportune time in the future. Details, such
as the interest rates, are specific to each deal and take into account such
risk factors as the length of the "runway" - the length of time before the company
runs out of cash and requires another infusion - and the milestones they have
already passed, such as product development, proof of viability and acceptance
in the marketplace.
DragonWave will likely go after another round of financing. While Blair wouldn't
say when, MMVP's Patterson speculates it would be either in December or January