Christmas came early for two Orange County companies that have received venture capital funding: Irvine-based Alsius Corp. and Newport Beach-based Winfire Inc.
Alsius, a medical device maker founded in 1996, received $20 million in third-round financing from Cambridge, Mass.-based MPM Capital LP, which manages more than $800 million in health industry investments. Alsius, which is Latin for cool, develops medical devices such as caterers and body temperature monitors.
Alsius has kept a low profile to avoid tipping off rivals, according to Chief Executive William Worthen.
“We’ve proceeded with militaristic secrecy,” Worthen said.
The company’s product for monitoring body temperatures is being sold in Europe. In the U.S., Alsius is undergoing clinical trials, and Worthen said he hopes for approval from the Food and Drug Administration within the next 12 to 18 months.
Alsius counts 45 employees, up from 30 this summer, Worthen said.
“We will be growing big time,” he predicted.
Winfire, which is in the troubled high-speed Internet access market, has been seeking between $50 million to $70 million in funding since August. Chairman Chad Steelberg said the company recently closed $17 million in funding and is trying to raise at least an additional $12 million.
Winfire’s newest investors include Newport Beach-based chip maker Conexant Systems Inc., Newport Coast Investments and Rhythms NetConnections Inc. of Englewood, Colo. The latter is also a digital subscriber line Internet access provider, while Newport Coast is a venture fund controlled by Steelberg and his brother Ryan, Winfire’s chief executive.
The company didn’t disclose how much each firm invested.
Chad Steelberg said the round still is open as the company seeks an additional $12 million from a telecommunications equipment maker that he declined to identify. He said the deal would also include $40 million in debt credit.
In recent months, investment interest in high-speed Internet access providers has collapsed. Huntington Beach-based Flashcom Inc. received $84 million in funding earlier this year, but recently it said it was unable to secure more funding and was laying off 120 employees.
Other competitors laying off employees include New Haven, Conn.-based DSL.net Inc. and Covad Communications Group Inc. of Santa Clara.
In late November, NorthPoint Communications Inc. lost a potential big investor when Verizon Communications backed out of a deal to buy a majority stake in NorthPoint because of its worsening finances and operations.
Steelberg said investors are worried about how Winfire will weather the current turmoil.
“If it’s the perfect storm, no ship will make it through,” he said. “We’re betting that it won’t be the perfect storm and we’ll be one of the companies still standing.”
For the first time since Winfire launched its DSL service in April, the company said it has obtained “subscriber gross margin profitability”,meaning average revenue per subscriber now exceeds the incremental cost of supplying DSL service in most markets.
Steelberg said he believes many financial people have not fully understood the company’s financial model, assuming Winfire was relying on advertising to generate revenue. But advertising is a small percentage of the company’s revenue, he said.
Steelberg predicted Winfire will produce a net profit by the second or third quarter of 2001. That depends on doing more marketing and increasing the customer base, he said.
Winfire currently has 60,000 subscribers and is averaging 700 orders per day, Steelberg said. The company counts 198 employees, of which 70 are engineers and software developers. n
