J.P. Morgan Chase & Co.'s venture arm, One Equity Partners, led the round, bringing along equity investors from both companies, including American Capital Strategies Ltd. of Bethesda, Md., Core Capital Partners of Washington, Jerusalem Venture Partners of Israel, Safeguard Scientifics Inc. of Wayne, Pa., and Summerhill Venture Partners of Toronto.

New York-based One Equity, which had investments in each of the companies, initiated merger discussions. One Equity partner David Walsh will serve as chairman of the combined company.

The new funding is expected to come after the two complete the merger, expected to close after the first of the year.

Walsh said One Equity first invested in Gaithersburg, Md.-based NexTone in November 2005 based on its session management software products that help fixed-line telecommunications carriers offer Internet protocol telephony. The firm made an investment in Burlington, Mass.-based Reef Point in June 2006 on the strength of a line of hardware products to help mobile telecommunications companies connect to fixed-line architecture.

"When we make an investment, we are typically looking at making investments in the ecosystem. And when we invested in Reef Point, we thought they were a great standalone company but that they would be a dream date for NexTone," Walsh said. "They had had some commercial discussions before we were involved, but that went further along. And when merger talks came up last summer, we realized it was like buying two companies and getting one free."

Woody Ritchey, CEO of Reef Point and designated CEO of the combined company, said commercial cooperation between the two companies had evolved into a collaboration on a combined product that the companies were marketing jointly, and that a merger gives the combined company greater resources in each independent market as well as in the combined emerging market. So-called session management, which allows carriers to trade Internet-protocol-telephony minutes has evolved separately in fixed and mobile markets, but has increasingly converged, particularly with the growth in video and other multimedia content.

"This is a combination of both architectures that is exactly what carriers are looking for, particularly for video services," Ritchey said. "We have already been responding to RFPs to move down this path, and through this combination, NextPoint brings together fixed and mobile networks securely and intelligently."

Pascal Luck, a managing partner with Core Capital, which first invested in NexTone in 2002, said the term "session management" didn't even exist at the time, but that NexTone was an early leader in architecture to allow carriers to get into IP telephony. He added that the combination with Reef Point is a logical next step in the evolution of the market.

"The companies have known about each other and worked together for a long time, and that has solidified over the last 12 months," Luck said. "What this finally does is give us a kind of unique space in a broad spectrum across both fixed-line and wireless carriers."

Ritchey would not disclose a premoney valuation for the combined company but said investors in both companies saw an increase from previous rounds.

NextPoint used no outside financial adviser in raising the financing. It had legal work on the investment transaction from Thomas Knox, Thomas FitzGerald, Lawrence Yanowitch and Daniel Max of Morrison & Foerster LLP in McLean, Va.

James Gorton of Latham & Watkins LLP in New York represented One Equity, while NexTone investors worked with George Nemphos of Duane Morris LLP in Baltimore. Steven Baglio and Gregg Griner of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP in Boston represented and Reef Point investors.