NexTone to receive $25 million in funding


September 12, 2006|By Stacey Hirsh | Stacey Hirsh,Sun reporter

NexTone Communications, a Gaithersburg maker of hardware and software products for the Internet, plans to announce today that it has received $25 million in funding.

The money from Columbia Partners LLC Investment Management in Washington brings to $92.5 million the amount of private funding NexTone has received. The latest round of funding comes in the form of debt structured around NexTone's business plan, though Columbia Partners said the details are proprietary and declined to provide specifics.

Founded in 1998, privately held NexTone makes products for traffic management on the information superhighway. Its technology handles the flow of information, helps different technologies work together and keeps data secure during Internet-based communications, such as voice over Internet protocol, or VoIP, phone service.

"We were looking for a way to participate in the explosive growth in not only the VoIP sector, but also in the general convergence of the multimedia," said Jason Crist, managing director of private capital for Columbia Partners. "There are many ways to do that, and we found NexTone to be the best way."

NexTone says the funding will help the company manage its explosive growth. It plans to use the money to enhance its product line and gain new customers.

The company's customer base has increased to 550 from 370 about a year ago, said NexTone Chairman and Chief Executive Officer Malik Khan. NexTone says that its customers currently carry more than half of the world's VoIP traffic. The company has more than 200 employees and another 60 contractors in India.

"There are lots of wonderful things that happen when you grow, but one of the things that happens when you grow as fast as we're growing is you constantly need cash to invest," Khan said. The company must invest in areas ranging from research and development to infrastructure, Khan said.

The $25 million in funding is Columbia Partners' first investment in NexTone. The company's previous investors include One Equity Partners of New York;Core Capital of Washington; Mid-Atlantic Venture Funds of Bethlehem, Pa.; Safeguard Scientifics of Wayne, Pa.; and Canadian Venture Capital firm BCE Capital.

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