Durham-based Phononic raises $44.5 million in funding

Phononic, a Durham company that sells solid-state cooling and refrigeration devices, has raised $44.5 million in new funding to scale up its manufacturing and enhance its sales and marketing efforts.

“We are growing sales and marketing to better penetrate the market with new and existing customers,” said founder and CEO Tony Atti.

Phononic’s latest round of funding is far and away the largest round of venture capital funding raised by a Triangle company this year. Founded in 2009, Phononic previously raised a total of $43 million in outside funding.

Today Phononic has 77 employees, up from about 50 a year ago, and the new cash infusion will fuel “substantial growth” in the work force, said Atti. Its devices are made in Durham, so much of that expansion will involve manufacturing jobs.

The company’s cooling and refrigeration technology is being used in several different industries. Atti ticked off some of the advantages of its devices: “There’s no freon. Very quiet. Compact ... Energy-efficient.”

Rex Health Ventures, the venture capital arm of Raleigh-based Rex Healthcare, is among the investors that participated in the latest round of funding. In September Phononic announced that Rex Healthcare would be “the first testing ground” for the company’s laboratory and medical refrigerators.

The initial products will be sold under the Phononics brand, but the company also is “talking to a number of distributors and partners where we may co-brand those products,” Atti said.

Customers in the medical and lab arenas are “very demanding,” Atti said. They require, among other things, very precise temperature control, uniform temperature distribution and no vibrations – which Phononic’s technology can deliver as it doesn’t have any moving parts.

The privately held company doesn’t disclose its revenue. But Phononic’s technology also is used by an unnamed Chinese company that makes refrigerators for the home that are sold in the U.S. as well as in China. Its technology also is used to cool electronics equipment by equipment makers whose products are used in the fiber optics, telecommunications and data server sectors.

With regard to the latter, Atti noted: “As more and more data is generated and uploaded or downloaded, the constraint for those processing speeds is heat – whether at the chip level, the rack level or the fiber level.”

Phononic’s technology “provides that very precise, very accurate, where-it’s-needed cooling,” Atti said. “You can wedge or mount our devices into very tight spaces where a fan or a heat sink or a blower can’t quite make its way in.”

“That’s a very exciting growth market for us,” he added.

Phononic’s latest round of funding is gargantuan by recent Triangle standards – nearly matching the total venture capital funding raised by all local companies in the third quarter, when 10 businesses attracted a total of $47.4 million. That’s according to data compiled by PricewaterhouseCoopers and the National Venture Capital Association, based on information supplied by Thomson Reuters.

“The more we can raise our national visibility with founding rounds like that, the better off we are,” said John Austin, the director of Groundwork Labs, a Durham organization that helps technology startups. “Where we really are struggling is raising those larger sums of money.”