Memory media maker gets $10.5M
By Paul Bonanos
The Daily Deal
November 15, 2005

Seeking to create a next-generation data storage product to replace CDs, DVDs and their high-definition counterparts, Israeli startup Mempile Ltd. has landed $10.5 million in a third round of venture funding from a worldwide syndicate of investors.

Jerusalem Venture Partners of Jerusalem and New York led the round, following on its minority investment in the company's $11.6 million second round in March 2004. Two other Israeli firms that participated in earlier fundings, Israel Seed Partners and Millennium Materials Technologies Fund, also provided new money.

The new capital brings Mempile's total venture funding to $27.5 million since its inception in 2000. Several prior investors, including second-round leader Kodiak Venture Partners, bypassed this round.

"It was their decision not to participate," said Mempile chief executive Avi Huppert. "We wanted to close this round smoothly in a short time. It took about six months."

Huppert said the company received several offers from other venture firms but elected to complete the deal with insiders instead. "The others remain potential partners for the future," he said.

JVP is now the company's largest institutional shareholder. In addition to Kodiak, Israel Seed Partners and Millennium, other shareholders include CSK Venture Capital Co. Ltd. of Tokyo, Portview Communications Partners LP of Israel and the Cayman Islands, and Alta Berkeley Venture Partners of London.

Huppert would not give the company's valuation but said the new funding was "a nice up round."

Founded in 2000, Mempile has spent five years developing an optical 12-inch disc that can hold a terabyte - 1,000 gigabytes - of information. That would be substantially more than other optical storage media, which include CDs, DVDs and high-definition versions of those technologies.

CDs typically hold about 700 megabytes of data, while regular DVDs can contain roughly 4.7 gigabytes. High-definition DVDs and ones designed for the newer Blu-Ray laser technology range as high as 50 gigabytes for double-layer imprints.

Using innovations in molecular chemistry, Mempile engineers have developed a method to squeeze more information onto the discs, which will be read with narrower lasers than are used for CDs and DVDs.

JVP's Glen Schwaber said Mempile is commercializing technology developed at the Hebrew University of Jerusalem, with which his firm maintains a close relationship. His firm provided a second-round term sheet for less money than the Kodiak deal, then took a minority stake in the round before the current investment.

"We think this intellectual property will enable a quantum leap in removable storage," Schwaber said. "We've not seen anything else close to fruition that provides a terabyte of storage on a removable disc."

Huppert said Mempile could introduce its first products, which will include both discs and drives, by late 2007 or early 2008, if all goes according to plan. "Market needs could include devices that require a terabyte of information," he said. "It could happen within five years - it's not a dream."

Mempile will target consumer applications including digital television recorders, as well as the enterprise storage marketplace. "We're really introducing a new technology to the world," Huppert said. "CDs, DVDs and HD-DVDs took five to seven years to become standards."

The startup, which has yet to receive revenue of any kind, will use the new money for general working capital purposes. Huppert would not discuss Mempile's burn rate, although he said the new capital is expected to last through 2007. He declined to say specifically whether the company will need another funding round.

Mempile did not retain outside attorneys or financial advisers while completing the funding deal. Tulchinsky-Stern & Co. of Ramat Gan, Israel, was investor counsel