Christinne Muschi, National Post Brian Barry, chief executive of Hyperchip, said the additional financing gives the company the clout it needs to assure potential customers that it has financial staying power.

The Quebec government has made a $50-million loan to create 280 jobs at a Montreal-based high-tech company with no customers or sales.

Investissement Quebec, an agency created in 1998 to help stimulate private investment and job creation, said it is lending the money to Hyperchip Inc., which is developing a router to more efficiently move Internet traffic.

As part of the loan agreement, Hyperchip will create 280 "high-quality" jobs over the next three years. Another 320 jobs are expected to be created at Hyperchip's suppliers in Quebec.

The provincial loan is part of a $70-million financing deal unveiled yesterday. In addition to the $50-million from the Quebec government, Hyperchip received $20-million from a group of venture capitalists led by Montreal-based TechnoCap Inc.

Hyperchip, which expects to launch a commercial version of its core router by the end of this year, has raised $220-million in the past three years.

Brian Barry, Hyperchip's chief executive, said the additional capital gives the company the clout it needs to assure potential customers that it has financial staying power.

"We are aware that it was great to be a start-up two years ago," he said. "Today, companies are wondering whether you will survive or not. This [deal] shows that we have a lot of cash and will stay the course."

Mr. Barry said that discussions with the Quebec government started three months ago. After getting a commitment for the loan, Hyperchip approached its venture capital investors about raising all of the capital at the same time.

Hyperchip, founded in 1997 by Richard Norman and David Chamberlain, is developing technology that makes it easier for telecommunication carriers to expand the capacity of their routers. Currently, telcos usually have to replace older routers to handle more traffic.

Given that Internet traffic is doubling every year at a time when telcos are looking to reduce capital expenditures, there is clear demand for routers being developed by companies such as Hyperchip.

CIBC World Markets expects the high-end router market to be worth US$3.5-billion by 2006, providing a huge window of opportunity for start-ups such as Hyperchip, Caspian Networks Inc. and Procket Networks Inc., and incumbents such as Juniper Networks Inc., Cisco Systems Inc. and Avici Systems Inc.

Mr. Barry said Hyperchip has been conducting a major trial with a large telco and hopes to deliver a final product by the end of the year. Potential customers for high-capacity routers include Cable & Wireless PLC, WorldCom Inc., Sprint Inc. and AT&T Corp.

As Hyperchip's technology gets closer to commercialization, he said the 280-employee company expects to hire 50 to 100 people for sales, marketing and customer support within the next six to 12 months.