A few raindrops recently fell on the parched funding landscape plaguing Rhode Island’s technology sector.
Tazz Networks Inc., a software startup, recently announced that it received a $7.7 million round of venture capital financing earlier this year.
Outside of the biomedical industry, venture capital deals for the state’s technology industry have been rare this year.
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Tazz, located at 3 Davol Square in Providence, has developed a software solution for telecommunications carriers. The company says its product allows network service providers to roll out new services to customers while streamlining the cost of operating their networks.
“(The product) allows carriers to automate operations, which then provides the foundation to deliver value-added services to subscribers,” said Dan Lowe, Tazz Networks co-founder, president and chief executive officer. He said the money is helping Tazz accelerate development of the product and build its sales and marketing force.
The Series A investment was led by Lazard Technology Partners and Pilot House Ventures, both based in Boston, along with local venture firms Zero Stage Capital, Point Judith Capital and the state-funded Slater Center for Interactive Technologies.
“The combination of a strong management team, dynamic market potential and a world-class product architecture sets the stage for a tremendous opportunity,” Woody Benson, principal at Lazard Technology Partners, said about Tazz in a written statement.
Lowe said Tazz’s two-pronged solution addresses critical mandates now facing the telecommunications industry. First, carriers are under tremendous pressure to streamline costs in the face of slowing revenues and massive debt amassed in recent years while they built their networks.
But network providers also are scrambling to move away from low-margin voice traffic toward offering more-profitable data services over their broadband networks. Lowe said large telecom carriers are lining up to challenge cable operators and even software and media companies such as Microsoft Corp., Sun Microsystems and AOL Time Warner.
“There is a battle over who is going to control how these new services are run across the network,” he said.
Lowe, however, is tightlipped about Tazz’s customer base and declined to cite examples of new services that the firm’s software will allow telecom carriers to offer. He said Tazz still is in “stealth mode,” and he also declined to say how many employees the company has.
An article that appeared last week in Private Equity Week, a venture-capital trade publication, says Tazz has 28 employees and no paying customers. But its product is being used by prospective customers on a trial basis, the paper said.
Since its founding in December 2000, Tazz has bootstrapped the company, subsisting on small investments from a variety of sources, including $250,000 from the Slater Center for Interactive Technologies. Tazz became the first company in that fund’s portfolio of startup tech firms to receive institutional financing, according to Thorne Sparkman, executive director of Slater Interactive.
Sparkman said Tazz Networks is a prime example of how Slater can help startup firms. Tazz started out in Slater’s first incubator space on South Main Street, where it was able to conserve cash through cheap rent and sharing amenities with other startups. Slater later invested $100,000 in the company, and provided an additional $150,000 in the form of a “bridge loan” to help Tazz reach its first venture round.
“The company has done a terrific job in identifying the daylight in that (telecommunications) business,” Sparkman said.
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