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Ottawa Business Journal Staff

Mon, Dec 15, 2003 12:00 AM EST Nimcat Networks announced Monday it has secured $5.75 million in Series A financing, thanks to Skypoint Capital and Innovatech Montréal.


The capital infusion will allow the Ottawa-based startup to proceed with its long-term plan to develop embedded call processing software for small and medium-sized businesses, said Mahshad Koohgoli , the company's CEO and founder.


"So far, the company has been operating at the seed stage," he said in a telephone interview with the Ottawa Business Journal last week. "This (funding) allows us to ... complete some of the components of our product portfolio."


The first-round VC funding will also go toward operations and sales and marketing initiatives.  Nimcat's product is one of the main reasons for Skypoint's interest, said Peter Diedrich, a partner with the Ottawa VC firm and leader of the Nimcat deal.


Nimcat is turning the traditional model of Voice over Internet Protocol (VoIP) on its head, he said.  "The normal architecture for infrastructure in that domain is a central device, which sits in a closet off of which hang a number of client devices like phones and PCs," said Diedrich.   "Part of the problem for a small enterprise is they have to invest in a box and put it in a closet just to be able to have IP telephony functionality between five employees. But these boxes are designed for 100 to 250 employees. So the entry-level ability for equipment vendors to get into the SME segment is almost impossible."


Nimcat is proposing to embed the necessary software into the handset itself. As a result, end customers need only "plug in and play" and they can scale their business one telephone at a time, rather than buying "a large hub with a large fixed cost", added Diedrich.  "What was most interesting in all this is the clean-sheet approach taken by (Nimcat) to solve the customer's pain point," he said.


Nimcat is engaged with Tier 1 original equipment manufacturers in the telecom industry and has reached a sales level that is "just tremendous for a company that had been around for 10 to 12 months by the time we'd first seen them", said Diedrich, adding some customers are here in Ottawa , while others are in Europe and the United States .


The funding is expected to be "instrumental in developing (the company's) distribution channels and strategic (original equipment manufacturer) relationships", said Koohgoli. "We have a number of (product) trials planned and we have also been successful in setting up relationships with other component vendors" in the telecom space, he said.


Nimcat's technology can be leveraged in several emerging markets, such as wireless, added Claude Vachet, director, IT portfolio at Innovatech.


The startup has filed provisional patents in the double-digits and is currently in the process of full applications, said Diedrich.   As for Skypoint, there are a few more deals "in the cooker" for 2003, Diedrich said.  "The activity level has gone up and you'll see a few more deals come in the next two to four weeks. We're seeing really good deal flow and we're beginning to see much more pickup here in Ottawa than we have had in the past."  Diedrich suggested Skypoint's recent merger with Venture Coaches could go far in improving the number of VC deals in Ottawa for 2004.  "(Next year), I think you can expect that, with the combined team and resources, ... there are a lot of good opportunities. The bigger the team, the more we can do."