The company is developing a new generation of telecommunications routers allowing for greater traffic across larger distances, cutting costs and reducing system redundancy. Though slowed spending by telecommunications carriers has hit the router market hard, it is expected to begin to rebound with increased Internet usage.

Montreal-based Investissement-Québec provided Hyperchip's debt financing in a three-year deal, and Montreal's TechnoCap led the equity investment, joined by Vertex Technology Fund of Singapore; Advent International of Carlyle, Mass.; Columbia, Md.'s Optical Capital Group; JT Ventures of Boston; New York-based Artemis Capital Group; and Kansas City, Mo.-based Pilgrim Baxter & Associates. The new capital is expected to carry the company to cash-flow positive status sometime in 2003 and provide it the strong balance sheet it believes it needs to market products to the largest telecommunications carriers.

"We still have cash from the previous round that would have brought us to general availability in the third quarter, and we already are in testing with one of the largest carriers," Hyperchip CEO Brian Barry said. "We didn't need money at this time, but having the government behind us says to carriers that we are there for the long run, and investors wanted to be sure we had all we needed."

Barry would not disclose a valuation for the round but said that terms were equal to those it set in the last round, when it raised C$67 million from a group including Optical Capital Group, Enron Broadband Systems, JT Venture Partners, Morgan Stanley and Putnam Investments Inc. That round was raised in September 2000 at the height of the Internet frenzy, when the company's publicly traded counterparts Cisco Systems Inc. and Juniper Networks Inc. were trading at four and 15 times their current valuations respectively.

In addition to those market leaders, Hyperchip will compete in the market for core routers with other startups including Cupertino, Calif.'s Pluris Inc.; Avici Systems Inc. of North Billerica, Mass.; Charlotte's Web Networks of Andover, Mass.; and Milpitas, Calif.-based Procket Networks Inc.

Investors bought into Hyperchip's previous financing with the anticipation it would be the final private funding, and several earlier backers are absent from the current round. The round brings Hyperchip's funding to C$220 million after four rounds beginning with C$5.6 million in late 1997. The company initially focused on chip development but shifted its attention to the larger systems market prior to raising C$20 million in a second round in January 2000.

The company did not use an outside financial adviser in this round, which Barry said came together in a little more than a month, and called on the legal services of Debbie Edward of Montreal's Ogilvy Renault.