Television signal processing chip developer Fresco Microchip Inc. raised $14.3 million in Series B funding from previous investors Ventures West  and Celtic House, both of Toronto, to support volume production of integrated circuits for PCs and consumer electronics products and move to profitability in 2009.

The company recently announced completion of its second product for mixed signal and digital processing for personal computer cards and consumer electronics in the European market, and has announced design wins with consumer electronics manufacturers including Japan's Panasonic Corp. and AzureWave Technologies Inc. of Taiwan. Fresco will use the new capital to ramp up chip production with contract manufacturing partner Taiwan Semiconductor Manufacturing Corp. and for development of additional products in the digital and analog television receiver market.

Mike Gittings, vice president of marketing for Markham, Ontario-based Fresco, said the company brought some unnamed new investors into the deal, but relied mainly on existing investors for the new capital as the company grows revenues on early product design wins. Fresco did not disclose a valuation for the round, but Ted Anderson, managing general partner with Ventures West, said it made sense to keep the round largely among insiders until the company has greater sales traction.

"The expectation is that this will take the company to cash flow break-even mid-next year," Anderson said. "We saw it as an inside round from the beginning, and quite frankly the parties at the table have the resources to fund the company, and the value proposition between now and positive cash flow is pretty substantial."

Fresco is developing low-cost radio frequency chips to replace tuners and signal demodulators that are still typically constructed using transistor technology. The company is focused on European and other global markets where the transition from analog to digital television signals is being conducted gradually, to help consumer electronics manufacturers bridge the gap between the two technologies.

Gittings said Fresco's focus has shifted somewhat from an early emphasis on tuners to receiver products such as AzureWave's, which is a USB card that allows users to receive digital or television signals on a laptop computer.
The company is also targeting manufacturers of set-top boxes, DVD recorders and digital video recorders as potential customers.

Brian Antonen, a partner with Celtic House, said Fresco has combined expertise from different chip design disciplines to serve a unique market that is currently in transition.

"The demand for ubiquitous TV content anyplace, anytime, anywhere continues to accelerate around the world," Antonen said in a statement. "Fresco's breakthrough technology bridges the gaps of cost, power, and performance by establishing a new benchmark for high quality TV performance and significant system cost reduction across a broad spectrum of television platforms."

The new investment round brings total funding in the 4-year-old company to $29 million, and Gittings said it does not expect to raise additional private investment. The company did not use an outside financial adviser in raising the round and had legal work on the deal from George Takach of McCarthy Tetrault LLP in Toronto.
Investors were represented by David Little of Fraser Milner Casgrain LLP in Ottawa.