Morpho Seeks $10 Million in Second Venture Round
By ANDREW SIMONS
Irvine chip upstart Morpho Technologies Inc. plans to raise as much as $10 million in a second round of funding, according to Chief Executive Fhahriar Sadri.
“Everything looks pretty good for us right now,” Sadri said. “We expect to enter into a financing agreement in the next few weeks.”
Morpho, which is just down the block from Newport Beach-based Conexant Systems Inc., Orange County’s biggest chipmaker, closed its first funding round in 2000, raising $5.4 million.
Investors in Morpho’s first round included Los Angeles-based SmartTech Ventures and San Diego’s Nextreme Ventures. San Jose chip designer Cadence Design Systems Inc. also took part in the round, which helped Morpho get operations started.
Company executives expect SmartTech Ventures and Cadence Designs to return for the second round. The company has selected a lead investor, but declined to specify the firm.
Morpho officials had planned to raise $10 million in a second round last year. But with venture capitalists tightening purse strings, the company had to settle for a much smaller bridge financing round. “It was tough,” Sadri said.
Company executives hope to use the money raised in the new round to up its staff of 31, half of whom were engineers at the University of California, Irvine. Like several other OC chip companies, Morpho boasts a large contingent of Ph.D.s,13.
Morpho also might use the money to market its products, which are configurable digital signal processors. The company said its chip designs are a cheaper option for customers because changes to the processor can be made using software instead having to redesign the chip.
Morpho just finished its first prototype in recent weeks and is busily courting customers. The company has a deal with a defense contractor and expects to close an additional sale in the next two months, Sadri said.
The expected venture funding should see the company through to 2003, when Morpho is expected to turn a profit, according to Sadri.
Once the company is profitable, Morpho likely will stage an initial public offering, he said.
“We are confident we can operate within our business plan,” Sadri said.
Morpho got its start after a group of UCI engineers received a grant from the Defense Advanced Research Projects Agency, or DARPA, the research branch of the Defense Department.
Before the engineers decided to form Morpho, they finished a design for the government. The basic design for the company’s chip is the same as that the group submitted to the government, Sadri said.
“Sometimes these DARPA grants end up becoming private companies,” Sadri said in an earlier interview. “That’s what happened to us. The entire team came over to Morpho.”
