Nishan Secures $10M Debt Financing

Startup Nishan Systems Inc. has secured a $10 million line of credit to ramp up production of its IP storage switch (see Nishan Gets Credit).

Nishan is among the earliest of vendors to create a switch that uses IP as an alternative to Fibre Channel for storage networks (see The Fall of Fibre Channel and Storage Networking: The Basics, page 10).

The debt financing, from Western Technology Investment and Venture Banking Group, must be paid off monthly over the next three years. The new input brings the total raised by the company to almost $100 million.

Nishans valuation remains unchanged at $350 million, sources say, although the recent financers took out a small number of warrants. Still, it's difficult to tell exactly how much the company may be worth in actuality: While it's been shipping product for a few months now (see Nishan Ships FC/IP Switch), the market collapse theoretically should have reduced the company's valuation.

Nishan isn't arguing. "This funding takes us well into 2003,” says Randy Fardal, VP of marketing for Nishan. “It is also an indication that we are on the right track, if they believe in us at a time when other companies are finding it hard to raise funds."This round of capital equipment and working capital financing will be used to pay the foundry that is spinning Nishan’s chips. And it will cover the cost of equipment to test the new products.

Nishan also needs cash on hand to meet any potential big orders for its product. “Sometimes growth can kill you if you don’t have enough cash available to purchase the inventory to build more product,” says Fardal.

Nishan's prior venture funding came from TPG-Comm Partners, ComVentures, Lightspeed Venture Partners, Raza Foundries, Sofinnova Ventures Inc., Discovery Ventures, and Altos Ventures. Funding also has come from strategic partners Dell Computer Corp. (Nasdaq: DELL), Sun Microsystems Inc. (Nasdaq: SUNW), Quantum Corp. (NYSE: DSS), Siemens AG (NYSE: SI; Frankfurt: SIE), and others.

— Jo Maitland, Senior Editor, Byte and Switch
http://www.byteandswitch.com