VOD Server Aspirant Raises $26 Million

With many technology vendors in the cable industry learning to operate with fewer millions in the budget or bank, MidStream Technologies Inc., an aspiring seller of video-on-demand servers, has raised some more millions.

To be specific, MidStream has attracted $26 million in new investments from a group of venture capital firms.

Canaan Venture Partners is the lead investor in this funding proposition, and that venture capital organization, with more than $2 billion invested in emerging health care, medical and information tech initiatives, will also place a key executive, Mark Mangiola, on MidStream's board of directors.

Polaris Venture Partners, ARCH Venture Partners, Xilink Inc. and Fluke Ventures all joined forces to give MidStream $22 million in initial funding several years ago, and are on board for this new investment process. Also providing funding: Frazier Technology Ventures and ProVen Private Equity.

The Bellevue, Wash.-based MidStream, organized in 1997, used seed funds to develop a set of video servers, known as the IP2000, and carved trial agreements with cable operators and telephone companies in six markets.

Trials began last fall, and two more cable operator trials will start by mid-September, said Edward Huguez, the former DirecTV Inc. executive who now serves as MidStream's CEO.

The $26 million infusion will go for sales and marketing efforts and working capital for further tech development.

Midstream's approach to architecture and technology separates it from SeaChange International Inc., nCube Corp. and other server vendors, Huguez said. The hardware is designed to be reprogrammable to handle different on-demand applications, as well as interactive TV and digital video recorder functionality. One server unit can process up to 2 gigabits per second of throughput, or over 500 concurrent streams of content transmitted at 3 megabits per second.

"This way, the operator can get more performance from a small footprint," he said. "We can deliver things in this platform that don't exist today, such as ways to keep service up in an area when natural catastrophes occur. We could encrypt content in different ways. This platform can set the stage for new kinds of capabilities to work."

Hughez declined to reveal participating trial operators, but did name some of the vendor partners.

Harmonic Inc. is supplying various functionality for integration; N2 Broadband is on board with asset management software; Spyglass Integration is testing out ITV applications and LSI Logic contributed centralized storage solutions.

MidStream used a hospitality suite at the National Show in New Orleans this spring to showcase its server. For December's Western Show, the company is considering shared booth space with another vendor. "We have ideas about who we want to be exhibited with, and some discussions going on," Huguez noted.