AuthenTec gets $15 million in funding
BY BRIAN MONROE
FLORIDA TODAY
MELBOURNE -- Fingerprint-sensor maker AuthenTec Inc. received $15 million in venture-capital funding, which is expected to help the company add jobs and expand as it strives for profitability.
The just-announced investment is the second bit of good news for AuthenTec in two weeks. Last week, the company signed a deal with Microsoft Corp. to increase the security on handheld electronic devices that use Windows operating systems -- like cellular phones and personal digital assistants -- with AuthenTec's fingerprint-detecting sensors.
The added venture-capital funds will help AuthenTec, which employs 55, add as many as 10 jobs in the next year.
Company officials say this latest round of financing -- while not its largest venture infusion -- is significant because global private-equity firm The Carlyle Group, which manages $19 billion, led the way with almost half of the money.
"They are a pretty powerful firm, with contacts and influence in each of the end markets that are our playing field, including cellular phone, personal computer and automotive access," AuthenTec Chief Executive Scott Moody said of The Carlyle Group.
Experts say if AuthenTec can balance growing large enough to meet the demand for its computer chips while remaining lean enough to stay profitable, there will be business opportunities in its market niche.
Revenues for biometrics -- using a person's unique features, like fingerprints, eyes or face, to restrict access -- are expected to nearly quadruple, from $1.2 billion in 2004 to $4.6 billion in 2008, according to the New York-based International Biometric Group.
"This is an industry that has had some dramatic growth and continues to have it," said Samir Nanavati, founding partner of the International Biometric Group. "That money may help them stay in the market long enough to capitalize on that growth."
He said that while AuthenTec is growing, the company also is in a "challenging position. They have a unique technology, but they are a small company that's got a single focus. They have nothing distracting them. But if you look at other silicon vendors, like Fujitsu and Sony, they are very large manufacturers with stable sources of non-biometrics revenues."
So, if there was a slowdown in that sector, AuthenTec's competitors likely could weather the storm better, Nanavati said.
"If biometrics didn't sell anything for the next 10 years, Sony would be fine, but AuthenTec would have difficulty sustaining revenues," Nanavati said. "That's a risk because they have nothing else to fall back on."
Still, AuthenTec believes its latest round of funding is not just a boost of confidence for the company, but for the biometrics industry overall.
Along with Carlyle, many of the companies that invested in the two previous rounds of financing invested in the latest round, which gives the resounding message that "we have great support from an outside investor, and past investors are bullish on the company's future as well," AuthenTec Chief Financial Officer Greg Teesdale said.
Since its founding in 1998, AuthenTec has raised more than $63 million in venture funding.
Moody said, unlike many venture-capital transactions, he wasn't actively seeking investors. Rather, they came to him.
"We weren't asking," he said. "We still have cash in the bank that would have gotten us to the next level, either profitability or being cash-flow positive. We had unsolicited offers from several venture firms, but chose Carlyle because of its strategic value to the company."
A future in which security is a top priority is one of the reasons Carlyle got on board.
"As computing devices become more mobile and more functional, enhanced security solutions have become a key need for device makers, service providers and consumers around the world," said Robert Grady, managing director of Carlyle Venture Partners.
He added that "biometrics, particularly fingerprint identification, is becoming a dynamic growth market with exciting new, real-world applications emerging in areas like wireless phones and devices, computers, security access and automobiles."
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