Durham’s Phononic raises another $40 million

Phononic, a Durham producer of solid-state cooling and refrigeration devices, has raised an additional $40 million from investors that boosts its latest round of funding to $71 million – the most money raised by a Triangle startup this year.

Investors are betting on the company’s potential upside.

“They have the proverbial game-changing technology,” said Merrette Moore of Raleigh investment firm Lookout Capital, who has invested his own money in Phononic as part of a group of primarily local investors. “In terms of the number of markets and the number of products that it can affect, it’s a very attractive swing for the fences kind of opportunity.”

But, Moore added, “they still have work to do, like a lot of companies at this stage.”

Phononic’s latest funding, unveiled Wednesday, came from clients of UBS’s wealth management businesses. It’s the second tranche, or piece, of the company’s fifth round of funding that also includes $31 million that was raised in September from new and prior investors, including the venture capital arm of Rex Healthcare.

Tony Atti, Phononic’s founder and CEO, said the funding was driven by the strength of the purchase orders the company has received for its products.

“We could really present a growth story to the investment community,” he said. The privately held company doesn’t disclose its revenue.

The infusion of cash is earmarked for boosting sales and marketing efforts and expanding customer and technical support in new and existing markets. Atti said the 105-employee company expects to add 20 to 25 employees over the next several months, mostly in Durham.

Founded in 2009, Phononic’s solid-state technology replaces the mechanical compressors and heat exchange systems that power traditional refrigerators. The result, the company touts, is a much quieter, more reliable and freon-free unit that consumes less energy. Its technology is also used in other cooling applications.

Atti said the international agreement struck last month in Rwanda, which calls for nearly 200 countries to phase out greenhouse gases called hydrofluorocarbons used in refrigerators and air conditioners, was “an unexpected upside surprise.”

“We use a completely non-toxic and non-flammable natural refrigerant, and we always have,” Atti said.

Phononic makes semiconductors and other components at its 20,000-square-foot facility on Capitola Drive in Durham.

Phononic produces its own Evolve brand of laboratory and medical refrigerators and Helmer Scientific uses the company’s technology in one of its medical-grade refrigerators. Phononic’s technology is also being used by Haier, a Chinese company that is the world’s largest appliance maker, in home refrigerators for the Chinese market that are expected to be launched by the end of the year and upcoming wine chillers that will be sold in both the U.S. and China.

Other Phononic products include devices for cooling the CPU in gaming and high-performance computer workstations, which began shipping in the summer, and semiconductor devices sold to fiber optics manufacturers that cool the lasers that transmit and receive data in fiber optic networks.

In addition, the company has a “robust development pipeline” of new products, Atti said.

When you add up all the rounds of funding since the company’s inception, Phononic has raised a total of about $160 million.

“You don’t have companies in RTP raising that much money,” Moore said. “That speaks to the company’s potential.”

This story was originally published November 16, 2016 at 9:01 AM with the headline "Durham’s Phononic raises another $40 million."