Ellacoya shovels in cash from Bell Canada

Ellacoya Networks announced today that it has raised a funding round of $13.5 million led by new investor BCE Capital, the venture arm of Bell Canada Enterprises. Ellacoya’s existing investors, Atlas Venture, Flagship Ventures and Lightspeed Venture Partners, also invested in the round while new money also came from Canaan Partners.

The Merrimack, N.H.-based traffic management vendor has previously found its greatest traction in the cable and international telco markets. Among the company’s largest announced vendors are Shaw Cable in Canada and Japan’s @NetHome. However, the involvement of BCE Capital provides a certain amount of validation for big incumbent North American telcos, said Gerald Wesel, executive chairman of Ellacoya.

“The real value add we have with BCE Capital is their relationships with some of the larger telcos,” he said. “It really proves the point that the product is a carrier-class product.”

As part of the new funding, which is the first since the company went through a recapitalization in 2003, David McCarthy, managing director at BCE Capital, will join Ellacoya’s Board of Directors.

McCarthy said one of the biggest attractions of Ellacoya was that the company has invested a significant amount of capital ($100 million by Wesel’s count) in the IP Service Control System, which helps broadband providers prioritize the most important traffic.

“We started some time ago in trying to understand this sector,” McCarthy said. “It’s a large source of cost and customer satisfaction. It’s important for these carriers to understand how to differentiate their networks.”

Wesel said the funding round should get the company to cash flow break even, though that timetable may be pushed back if Ellacoya decides to expand faster.

The funding also comes as a time when carriers increasingly are putting greater emphasis on traffic management.

“Most of the service providers have really focused on their core networks being carrier class,” Wesel said. “We’re actually seeing a trend that this traffic management piece is becoming so strategic that they’re extending their carrier-class requirements