Cornice lands $51M from VC, considers IPOBy Tom Locke
The Business Journals
Updated: 7:00 p.m. ET Feb. 15, 2004Longmont-based storage device maker Cornice Inc. is looking at roughly doubling its employment and is eyeing the possibility of an initial public offering within a year or two after raising $51 million in venture capital last month.
advertisement
Cornice already may have drawn the most venture capital any Colorado company will attract during 2004, if 2003 deals are any indication.
Cornice had 71 employees at the end of 2003 and plans to raise that number to 146 by the end of 2004, with most of the additions coming in Longmont, Cornice CFO Jeff Elberson said. Most of the new employees will be engineers and salespeople, including some sales additions in Asia, where offices are planned for Hong Kong and Taiwan.
Cornice was founded in August 2000. In June 2003, it started shipping its 1-inch, 1.5-gigabyte rotating magnetic storage device, which is embedded in consumer electronics devices such as MP3 music players. It has advantages in terms of shock resistance, battery usage, storage capacity and price, according to Elberson.
Despite its youth, Cornice has attracted some big-name customers and investors.
Its customers include Thomson, for its RCA Lyra Micro Jukebox; Digitalway, for its USB storage product; iRiver, for its MP3 player; and Rio Digital Audio, for its Rio Nitrus Urban and Rio Eigen Executive MP3 players.
The Rio Nitrus has been named one of the top three selling MP3 players, and "it's a testament to both Rio and Cornice," said Hector Marinez, a spokesman for Santa Clara, Calif.-based Rio.
"They've been a very good partner so far," Marinez said. He said the Cornice device fits a niche in the market, providing the right price and the right amount of storage -- up to 600 songs on the 1.5-gigabyte device.
He also said Cornice's latest round of financing raises its strength as a supplier. "Any time you're doing business with a supplier, you want to make sure they're healthy," he said.
Cornice's product has generated a resonance with well-known customers, and that's been a key factor in its ability to raise so much money and raise it so fast, Elberson said. Seasoned management at Cornice also helped win the confidence of venture capitalists, he said.
Cornice started working on the latest financing round last fall, he said, and it closed it in January. That's quite fast in a venture environment still known to be challenging, he said. "We were told by lots of folks that raising venture money in this market would be very tough."
Melissa Crane Guzy, managing director of San Bruno, Calif.-based VantagePoint Venture Partners and a Cornice board member, cited several reasons for investing in Cornice, including rising demand for the type of storage Cornice provides, its excellent management and engineers, and a product that provides lots of capacity at a reasonable price.
Guzy said an increase in production has been in planning for six to nine months, and some of the money from the $51 million round will be used for capital equipment at the SAE plant in Dong Guan, China, where Cornice outsources its manufacturing.
Thanks to the new financing, "we could add multiple lines faster," Guzy said. "There's a plan in place for the rest of this year."
VantagePoint was the largest single investor in this round, as well as the previous venture round, Guzy said, but she and Elberson declined to divulge the percentage of any investor's holdings. Elberson did say venture companies own a majority of the Cornice stock.
In the previous financing round, which had a second stage that closed in August 2002, Cornice raised $23 million in venture money and $3 million in money from other investors, including some individual angel investors, Elberson said. Prior to that, Cornice had raised more than $4 million at the end of 2001 and beginning of 2002 from strategic partners, angel investors and others, he said.
The total raised by Cornice is now $81.7 million, he said.
Among the investors in the latest round were previous investors CIBC Capital Partners, Nokia Venture Partners and VantagePoint, while new investors were BA Venture Partners, which is the venture arm of Bank of America, and GIC Special Investments Private Ltd.
While wireless phone giant Nokia is an investor in Nokia Venture Partners, the venture capital investment is a stand-alone decision and is not tied to whether Nokia itself is interested in Cornice for strategic reasons, Elberson said.
Right now the management at Cornice is focused on building its business, he said, but the next major financial move probably would be an initial public offering.
"That would be within the next 24 months," Elberson said. "It could be as soon as within the next 12 months."
Guzy said there are basically two exit possibilities for the venture investors: an IPO or a sale of Cornice.
Investment banking firms already have contacted the company about the possibility of an IPO, she said, but Cornice will look at both alternatives and consider market conditions in deciding which to choose.
"There's no pressure for us to do anything," she said.
© 2004 The Business Journals
