Massana, the Dublin and Silicon Valley-based silicon semiconductor company, has completed first round financing of $7 million (€6.85 million).

It represents one of the largest venture capital investments in an Irish company, and is only the first round of substantial investment Massana is planning to take on within the next 18 months.

The undisclosed minority shareholding is led by Irish company, ACT venture capital, along with US investment firms BancBoston Capital and Vision Capital. Massana initially sought a $3 million investment, but saw the ready availability of funds, and opted to go for a mix of investors.

The funding is expected to finance Massana over the next 12 to 18 months as it develops an analog design team. This will complement its digital signal processing (DSP) designs, which require the analog element to produce silicon chips capable of high-speed networking and broadband communications.

The funding will also be used to build up Massana's international sales and marketing presence, particularly in the US and Asia.

Massana currently employs 25 people, and according to company chief executive, Mr Paul Costigan, the team may eventually grow to 50, but Massana's primary focus will be to offer its products and services through partnership and contract arrangements.

Massana has generated significant investor interest since it set about seeking funding more that a year ago. The recent addition to Massana's management team of US-based Mr Irving Gold, formerly vice-president marketing of DSP Group - an established player in the silicon semiconductor industry - represented a strong endorsement of the company's potential in the market.

Massana in the last year has changed its business model from a campus company designing chips exclusively to order for customers, to a product-focused company with loyalty-based revenues. The result has moved Massana into a loss-making position.

According to Mr Costigan: "Realistically it will be quite some time before we are profitable again. But profitability is not something our investors are focused on in the short term. We are forgoing the immediate opportunity for profit by availing of capital to invest in opportunities that will yield an upside in the future, rather than revenues right now."

Massana has based its model of development on industry heavyhitter, ARM, and smaller US-based, Aware. According to Mr Costigan, Massana's primary focus now is on expanding the company, and no decision has been made yet on whether it will opt for a trade sale eventually or go the public flotation route.

"Obviously, the investors want a return on their investment, and some kind of exit mechanism, but we are not fixated on it at the moment. Our current business model fits very well with pursuing either route," Mr Costigan says.

The company, which will have its headquarters in Silicon Valley from January 2000, intends to bolster its management team by appointing a chief financial officer and engineering director in the new year.

ACT, Vision and BancBoston will also appoint non-executive directors to the Massana board shortly.