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Financing Solutions that Fit
Tropic Networks, one of the city's best funded startups, closed a third round of financing worth $30.3 million on Monday that should carry it through to profitability next year.

The company's vice-president of marketing and business development Rob Lane told the Ottawa Business Journal in December the company would close the deal early in the New Year.

The latest round of investment was led by Celtic House Venture Partners and included money from Goldman Sachs' Private Equity Group, Kodiak Venture Partners and the Teachers' Merchant Bank.

Before Christmas, the company cut about 25 per cent of its workforce to focus on the most promising half of its business. The job cuts reduced the company's workforce of 150 to around 115.

The company is narrowing its focus to its broadband DWDM products and freezing further work on its Ethernet technology.

DWDM, or dense wavelength division multiplexing, is a technology that puts data from different sources together on an optical fiber, with each signal carried at the same time on its own separate light wavelength.

Since the release in May of the company's key main product, the TRX-24000, Tropic has enjoyed strong customer traction among major telecom carriers, says Kevin Rankin, the company's president and chief executive officer Kevin Rankin.

"You have to develop the customer relationships that allow you to focus on a business model based on short-term profitability, " he says.

The company expects to start generating significant revenues this year and become cash flow positive by late 2004 or early 2005. Rankin won't speculate on what the company's preferred exit strategy is.

""The goal is to create a stand-alone profitable business," Rankin says. "The pressure today for a private company is the same as it is for a public company; spend the least amount of cash, be the most effective and focus on profitability."

In 2001, the company received two rounds of investment worth a total of US$75 million.

Despite being flush with cash, the company took a conservative approach to its business as the telecom downturn deepened in the latter half of 2001. In October of that year it also cut 20 per cent of its workforce.

with files from Michael Hammond, Ottawa Business Journal
Posted in: Communications

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