SolarFlare Communications Inc., an Irvine chipmaker backed by Intel Corp., has raised nearly $50 million in its latest round of venture funding, doubling its total raised.
The funding is among the largest here by a startup in recent months. It comes close to the $66 million total invested in all startups here in the fourth quarter.
The financing also makes SolarFlare the best funded hopeful here with $78 million in money raised, according to the Business Journal’s count.
Next is Foothill Ranch-based Aristos Logic Corp., a maker of controllers for data storage systems, which has raised $65 million.
SolarFlare’s latest round includes money from prior investors Intel Capital, the chipmaker’s venture arm, Corona del Mar’s Miramar Venture Partners, Santa Monica-based Anthem Venture Partners and San Diego-based Windward Ventures.
One newcomer,Westport, Conn.-based Oak Investment Partners LP,also invested in SolarFlare.
The size of the funding is surprising given the relatively small investments venture capitalists have been making in other local companies of late. Many recent investments haven’t broken the $20 million mark.
Solarflare’s funding comes in two pieces,the first worth $20 million and the rest coming later, according to Russell Stern, the company’s chief executive.
“As we went out to raise money, we knew we would require an additional round of funding,” Stern said. “We were asking ourselves, ‘Do you do it in one shot or two?’ We received growing interest from investors to do it in one round. Because it’s distracting for the team, they have to be taken off line to go raise money.”
SolarFlare makes chips for switches, devices that direct the flow of data on a network.
The chips are designed to make smaller-capacity networks interact with heftier ones at data transfer speeds of about 10 gigabits per second, much faster than the standard two gigabits per second.
That solves a conundrum for businesses by letting them upgrade, rather than replace, networks.
And that’s what appeals to venture capitalists about SolarFlare.
The company’s chips have the “potential to dramatically cut enterprise networking costs,” Bandel Carano, general partner of Oak Investment Partners, said in a statement.
Carano is joining Solarflare’s board.
The challenge for SolarFlare is to keep the cost of its chips low.
The company plans to use contract producers to make its chips, which makes it essential for the company to design chips using cheaper materials.
Most of the latest round of funding is set to go toward designing and producing So-larFlare’s first line of chips, Stern said.
The goal is to get chips to potential customers by the end of this year with the hopes they’ll design them into their products, he said.
By the end of 2006, Solarflare should be producing chips in big volumes, Stern said.
But there could be one potential roadblock,or savior.
Irvine chipmaker Broadcom Corp. is eyeing the same chip market as Solarflare.
“They have stated that intention,” Stern said. “But we have a pretty big head start.”
Broadcom has a track record of buying smaller chip companies, many times with an eye toward moving the company into a market.
Solarflare has Broadcom ties.
All of SolarFlare’s managers hail from PairGain Technologies Inc., the former Tustin-based company that’s now part of ADC Telecommunication Inc.
Broadcom cofounders Henry Samueli and Henry Nicholas worked at PairGain before starting their company.
And Miramar Venture Partners, one of SolarFlare’s backers, counts Samueli as an investor.
