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Morrisville, N.C.-Based Software Maker LVL7 Systems Gets Venture Capital

Posted on: Monday, 20 October 2003, 06:00 CDT

Oct. 21--Networking software maker LVL7 Systems will announce today that it has secured $15.8 million in venture-capital funding, one of the largest information technology investments in the state this year.

The Morrisville-based company was seeking up to $10 million for its series B funding to help generate new customers and become profitable.

LVL7 intends to increase international sales of its Fastpath software, which is used by companies that make Ethernet switches and routers found in homes, offices and data centers to handle the movement of Internet traffic.

"We are happy to raise more money than we had anticipated," said Chief Executive Officer Albert D. Bender. "There was a good deal of interest in this investment. We had planned on closing in December, but we did it three months faster than I had planned."

Bender said the funds will be used to build up the company's sales team, customer service department and engineering staff. Over the next year, it plans to add about 10 employees to its 77-member staff. The company, which was founded in 1999, wants to increase sales in Europe and Asia.

The funding was led by Carlyle Venture Partners, the U.S.-based venture-capital arm of The Carlyle Group, a global private equity firm with more than $16.2 billion under management. Other contributors included previous investors Gabriel Ventures Partners of Silicon Valley, H.I.G. Ventures of Miami and Research Triangle Ventures of Raleigh.

Investors said they were attracted to LVL7 because of how well it has positioned itself in growing networking market. It currently has more than 30 customers including large manufacturers such as Broadcom, Infineon, Intel, Marvell and SwitchCore.

"LVL7 is a leader in a market experiencing explosive growth," said Brain Hayhurst, managing director at Carlyle Venture Partners.

Hayhurst said LVL7's software makes it easier, faster and cheaper for equipment manufacturers to get new products to market, cutting development time by six to 18 months.

The demand for fast Ethernet networking equipment is steadily increasing, particularly as technology companies try to maintain production with significantly smaller work forces.

According to a California industry analyst, the Dell'Oro Group, Ethernet switch sales will increase from $11.3 billion in 2002 to $16 billion in 2007.

Venture-capital investors have shied from committing money to unproven technology companies since the Internet-stock bubble burst three years ago. Technology stocks have rebounded this year, but there has not yet been a resurgence in venture funding.

Bender said that with the latest funding, LVL7 should become profitable by the second half of next year. The company previously raised $8.5 million in venture-capital funding.

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(c) 2003, The News & Observer, Raleigh, N.C. Distributed by Knight Ridder/Tribune Business News.

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