Packet Engines Gains New Ally Spokane Capital Management Poised To Invest In Upstart High-Tech Company

A Spokane venture capital group is forging a relationship with Packet Engines Inc., an emerging Spokane high-technology company.

Thomas C. Simpson, managing director of Spokane Capital Management, has taken a position on Packet Engine’s board of directors and said Wednesday, “When and if Packet Engines goes out for its next financing, we certainly intend to participate.”

Simpson formed Spokane Capital Management’s second venture capital fund, Inland Northwest Investors, L.P., in 1995.

The group raised $5.8 million targeted for investment in growing Northwest companies.

Packet Engines develops intellectual property and products related to gigabit Ethernet applications. The company’s products are used in links within computer networks that are capable of processing one billion bits of information per second.

“Packet Engines is exactly the type of company in which I want to invest both time and money,” Simpson said in a statement announcing his appointment to the board. “The company is poised to become the leader in a growing, multibillion-dollar market. Moreover, Spokane will gain a great deal. Packet Engines provides not only the opportunity for new high-end jobs, but it is also making a substantial investment in the Inland Northwest.”

Bernard Daines, Packet Engines’ president and chief executive officer, founded the company in 1994. What started as a three-person operation will employ 50 by the end of the year.

Earlier this year, Daines exchanged 42 percent of the company for a $7.5 million investment from two venture capital groups, the Mayfield Fund of Menlo Park, Calif., and Battery Ventures of Boston.

Most of that money will be applied to developing a manufacturing operation to produce gigabit Ethernet switches.

The company also announced a $1.5 million, three-year line-of-credit agreement with Washington Trust Bank. That money will be used primarily to purchase computers and related products including hardware, software and testing equipment, company officials said.

The company has been located in a strip mall development at 12119 E. Mission, but is expanding into a new facility at 11707 E. Sprague. The company will relocate its engineering, development and support operations there this month.

The alliance with Spokane Capital Management implies that Packet Engines is headed for another round of fund raising. But when that will happen, and what form it will take, is uncertain.

“Right now, they are really focusing their time and effort on developing their initial products,” Simpson said in an interview.

The company wants to have those products available for delivery by mid-1997.

A public stock offering may be an alternative the company will explore.

“A young, rapidly-growing company like this that is backed by prominent venture capital funds certainly would have a public offering as one of many alternatives available to it,” Simpson said.

Simpson said one of the most powerful attractions to Packet Engines for Spokane Capital Management was Daines himself. Daines is considered one of the pioneers of the Ethernet technology industry.

“Once we learned about Bernard’s background and his reputation in the industry,” Simpson said, “it was pretty clear that this was one of the more attractive young Northwest companies available to us.”

, DataTimes