InPhonic Raises $56 Million In New Round of Financing

By ANN GRIMES
Staff Reporter of THE WALL STREET JOURNAL

InPhonic Inc., a Web-based wireless-distribution company, plans to announce Monday that it has raised $56 million in a fourth round of venture funding from Technology Crossover Ventures, a Silicon Valley venture-capital firm.

The financing brings the total raised by the Washington, D.C., company to $85 million and is one of the largest in a spate of recent funding rounds in the wireless space.

The deal points to increased confidence on the part of some investors in later-stage companies that have weathered the economic downturn. "The companies who have grown through the period are relatively small in number but demonstrating great business momentum," said Jay Hoag, a general partner with TCV.

InPhonic hopes to do for wireless-cellphone distribution what Expedia Inc. did for the travel industry. Among other things, the company provides a one-stop customized and branded portal that allows customers to sign up for cellphone and other wireless services. The company plans to use the new money for capital expenditures and to continue a spending spree that to date includes nine acquisitions. InPhonic registered its initial public offering with the Securities and Exchange Commission in 2002.

The wireless sector attracted nearly $300 million in venture funding during the second quarter, ranking third behind biotechnology and enterprise software, according to preliminary quarterly figures from Venture Wire, an online industry tracker.

Analysts such as Craig J. Mathias of FarPoint Group in Ashland, Mass., have said they anticipate more consolidation in the sector, especially as certain companies gain traction and emerge from the pack.

Earlier this month, San Francisco-based wireless-switch maker Vivato Inc. raised a $44.5 million series C round led by Advanced Technology Ventures, a bicoastal firm with offices in Palo Alto, Calif., and Waltham, Mass. Trapeze Networks Inc., a wireless-networking company based in Pleasanton, Calif., raised $34 million second round led by venture firm Oak Investment Partners, of Palo Alto, Minneapolis and Westport, Conn.

Visto Corp., a Redwood City, Calif., company that makes software for wireless hand-held devices, extended a second round of funding this month and pulled in $20.1 million, on top of a previous $30.1 million round in March. And two weeks ago, Spatial Wireless Inc., another wireless-networking-systems company, based in Richardson, Texas, raised $27 million in a fourth round led by VantagePoint Venture Partners, of San Bruno, Calif.

The activity has led some venture capitalists to deem the wireless sector overfunded. "I call it 802.Chapter 11," says Bart Schachter, a general partner with San Francisco's Bluepoint Ventures, referring to the number of venture-backed start-ups developing products for the market around the 802.11 wireless standard.

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