Ellacoya Networks Attracts New Investors in $13.5M Financing; BCE Capital leads the funding round; Canaan Partners joins syndicate of world-class investors

Business Wire, July 18, 2005

MERRIMACK, N.H. -- Ellacoya Networks, Inc., a leading provider of carrier-class intelligent bandwidth management systems for broadband IP networks, today announced it has raised an additional $13.5 million in venture capital funding. The financing was led by new investor BCE Capital, the venture arm of Bell Canada Enterprises, and also included Canaan Partners as a new investor. Existing investors Atlas Venture, Flagship Ventures and Lightspeed Venture Partners, also invested in the round.

"Internet bandwidth and traffic management is a very exciting and promising market, helping broadband service providers ensure customer satisfaction, profitably differentiate their services and develop new sources of revenue for the future," said David McCarthy, Managing Director at BCE Capital. "We concluded that Ellacoya had the strongest, most scalable carrier-class product in this field and found a growing customer base that confirmed it. We are pleased and excited to be joining the team." As a result of the investment, David McCarthy will join Ellacoya's Board of Directors.

The Ellacoya IP Service Control System enables application traffic that has specific bandwidth and latency requirements to be prioritized on a per-subscriber basis, ensuring the application's proper performance regardless of the overall traffic load on the network. It allows the broadband service provider to first understand which applications are being consumed by what percentage of subscribers and then to control traffic based on that data in a dynamic and automated way. In doing so, the Ellacoya system enables mainstream applications to be automatically prioritized for customer satisfaction, and also provides a platform for the delivery of tiered service plans on an application and subscriber-specific basis.

"Ellacoya has game-changing technology and products that are empowering service providers to save significant operations costs and move beyond offering basic Internet services to delivering value-added, premium services that enable profitable new business models," said Mark Mangiola, Venture Partner at Canaan Partners and veteran broadband industry executive. "We are excited about this company. With its product development and market execution successes, as well as a strong management team, Ellacoya is the indisputable leader in this fast growing market segment."

The new funding will be used to accelerate product development schedules and to accelerate sales and marketing expansion worldwide. Ellacoya's IP Service Control System is deployed worldwide in over 75 service provider networks, managing millions of subscribers. Ellacoya has system-wide deployments at Tier 1 broadband providers in each global region, including announced deployments at Shaw Communications in Canada and @NetHome in Japan.

"Ellacoya is able to address the new requirements for bandwidth management and tiered services capabilities with a field-proven product that is the result of more than six years of product development and three years' experience in carrier-class network deployments," said Gerald Wesel, Chairman and CEO at Ellacoya Networks. "The funding enables us to accelerate plans to address a burgeoning market demand and we are thrilled to have the domain expertise that BCE Capital and Canaan Partners bring to the table."

About BCE Capital

BCE Capital is a leading Canadian venture capital firm. Founded in 1987, the firm has built a track record of investing in and developing some of the most successful emerging growth communications and information technology companies in North America. BCE Capital has backed over 40 management teams, and has seen several of them through IPOs and acquisitions. Currently, the firm is investing in Fund IV, a US$200 million fund focusing on early-stage communications and IT companies.

BCE Capital is affiliated with Bell Canada Enterprises (BCE), Canada's largest communications company. Through its main subsidiary Bell Canada, BCE provides local telephone, long distance, wireless communications, Internet access, data, satellite television and other services to residential and business customers through some 27 million customer connections. For more information,visit www.bcecapital.com.

About Canaan Partners

Canaan Partners is an early-stage investor and creates next-generation companies in Internet infrastructure, communications, software and services, medical devices, biological sciences, pharmaceuticals and diagnostics. Founded in 1987, the firm has invested in more than 210 companies, completed 52 mergers and acquisitions, and taken 45 companies public. Canaan was an early investor in Dexcom (DXCM), DoubleClick (DCLK), CommerceOne (CMRC), Copper Mountain Networks (CMTN), Esperion (ESPR), Immunicon (IMMC), International Network Services (INSS), ONI Systems (ONIS), and Peninsula Pharmaceuticals, along with dozens of other market-leading companies. Canaan has offices in Menlo Park, California and Rowayton, Connecticut. More information can be found at www.canaan.com.