Jun. 17–Spatial Wireless Inc. of Richardson will announce Tuesday that it has raised $27 million in venture capital, one of the largest investments in a Dallas-area technology start-up this year.
The investment, which would have been considered modest only a few years ago, is a sizable sum these days.
It’s also another indication that venture capitalists are willing to extend their bets on firms that have shown promise even as they remain concerned about industry prospects.
Spatial, which makes telephone switching equipment and software for mobile-phone companies, plans to use the funds to expand overseas and for research and development.
Since its inception in 2001, the company has raised $58 million in four funding rounds.
By comparison, venture capitalists invested a total of $119.4 million in the first quarter in Dallas-area firms, down from $155.3 million a year ago.
The funding round was led by VantagePoint Venture Partners of San Bruno, Calif., and included Spatial’s former investors: Austin Ventures; Sequoia Capital; Dali, Hook Partners; Genesis Campus; and Qualcomm Ventures.
“Telecom equipment is not cheap,” said Eric Ver Ploeg, a partner with VantagePoint and a new Spatial board member. “It’s a capital-intensive investment.
“What we saw in Spatial Wireless is a company that is dominating what is inevitably going to be a very important space in the wireless equipment arena.”
One venture capitalist not affiliated with Spatial said investors are not giving similar sums to companies just getting started.
“If one believes that… [new investments] are going to require that kind of capital, they don’t get out of the blocks, period,” said Jackie Kimzey, a partner at Dallas-based Sevin Rosen.
“I don’t think you see anything like this unless it’s a legacy” investment. Spatial executives say their equipment and software allows cellular companies to reduce their costs by buying and operating fewer large telephone switches.
They use smaller machines that are more versatile and can be located closer to wireless towers and radios.
Officials said the firm’s equipment is being tested and used by four American phone companies that use the GSM standard, or global system for mobile communications. They declined to name the carriers.
Cingular Wireless, AT&T Wireless Services Inc. and T-Mobile USA use GSM in the United States.
“Right now, it’s only the early market and small-size deployments,” said Pardeep Kohli, Spatial’s chief executive.
Wireless phone companies in the United States are already spending $2 billion on switching equipment a year.
“There is no reason why they will not buy lower-cost… equipment,” Mr. Kohli said.
It remains to be seen how phone companies will spend that money and whether a newer firm such as Spatial can win business away from established vendors such as LM Ericsson AB.
To address concerns about its viability, Spatial is selling its equipment through partners such as Siemens AG of Germany that carriers are more comfortable dealing with, Mr. Kohli said.
It hopes to sign more such allies in the coming months.
Also uncertain is when and whether phone companies will spend on new network gear.
Some investors and analysts have expressed optimism that spending may pick up soon.
Carriers have issued more requests for proposals, which generally precede purchase contracts and orders, than in months past.
“The feeling is we are flying a little into clearing weather, although there are not a lot of great data points,” Mr. Kimzey said.
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