Welcome back to Baby Breakerdom! This week's quest to uncover budding Rule Breakers finds investors dialing up disruptive technology and college kids causing a ruckus.
First up this week is Digium, which makes telephone-switching technology of a similar variety offered by Cisco Systems (Nasdaq: CSCO ) , Nortel Networks (NYSE: NT ) , and Avaya (NYSE: AV ) . There's just one catch: Digium's software for connecting calls is open source. Sales and profits come from hardware and professional services.
Apparently, business is going well. On Wednesday, the firm closed an initial $13.8 million round of funding from venture capitalist Matrix Partners. Open source mavens may recognize the name; Matrix was one of the backers of the open source application server JBoss, which in April was sold toRed Hat (Nasdaq: RHAT ) for more than $400 million.
No wonder Matrix still likes open source, although "like" may be too tame a description. Matrix General Partner David Skok told VentureWire in an interview that Digium's Asterisk telephony technology "has the potential to be sold to every company in the world." Okay, then.
Interestingly, Digium founder and CEO Mark Spencer said in announcing the deal that the company didn't need the funding. Instead, says Spencer, Digium sought Matrix's expertise to help grow the business globally. That seems fair, given Matrix's success with JBoss. But it's also hard to see how Digium could do much better than it already is. Referring back to the press release, Digium says that it has been profitable since 2002 and has grown by 100% for the "last several years." What's more, there are currently 1 million Asterisk users and each day brings another 1,000 new downloads of the software. Sounds like it's time to add this firm to our Rule Breaker Universe. (Access available with a 30-day free trial.)
Next up is Ruckus Network, which is nearly as rowdy as it sounds. Ruckus provides a music and video downloading service for college students. If that seems suicidal given the runaway success of the iTunes music store, don't tell Battery Ventures. The Boston-based VC led a $13.7 million round of funding for the start-up in tandem with Eastward Capital, Pinnacle Ventures, and Shelter Capital.
Besides, Ruckus may be rebellious, but it isn't exactly in a tete-a-tete with iTunes. The service sells to universities as an alternative to illegal downloading. Schools buy a license from Ruckus to access its catalog of 1.5 million music tracks, which are then made available to students, usually free of charge. Ruckus earns additional money if downloaded songs are burned to a CD or added to a digital music player.
The pitch has caught on; 70 campuses have signed up with the service, 15 of which just inked deals this summer. Notables include UC Berkeley, the University of Denver, Georgia Tech, and the University of Oklahoma.
More could be in the wings. Along with the funding, Ruckus is aggressively recruiting talent, including new CEO Michael Bebel, who at one time was the Chief Operating Officer for Napster (Nasdaq: NAPS ) and the CEO of peer-to-peer service Mashboxx. Look out, Apple.
That's all for this week. See you back here next Friday when we continue the quest to find the next ultimate growth stock.
For more Rule Breaking Foolishness:
- Check in with last week's infants.
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