Rustic Canyon

SAN JOSE, CA – January 28, 2008 – Capella Intelligent Subsystems, the leading provider of Wavelength Selective Switches (WSS) for use in reconfigurable optical add/drop multiplexers (ROADM) applications, today announced it closed $15 million in equity financing. The financing was led by the Lucas Venture Group, and existing investors Levensohn Venture Partners, Rustic Canyon Partners, and Formative Ventures participated fully.

 The $15 million in new capital will be used to expand and strengthen Capella’s presence in the ROADM market, which is expected to grow to $2.8 billion over the next 4 years, according to the most recent Needham investment analysis report. New product offerings and operational improvements are Capella’s key focus in the coming months, as the company expands to meet growing market demand.

 “We are in the midst of global network transformation driven by consumer services such as video, music and social networking. Capella is well-positioned as a key enabler in broadband IP content distribution. As companies upgrade their networks to support IP-based consumer services, Capella’s technology will be critical,” said Larry Schwerin, president and chief executive officer of Capella. “Networks need to deliver quality broadband services at a price consumers will pay, and Capella provides the industry-leading solution to enable their customers to build cost effective, flexible networks.”

 “We have been pleased with the progress of Capella, and this financing reflects the strength of its market position and technology platform. We have great confidence in the management team and technology, and look forward to seeing how Capella positively impacts this IP evolution,” remarked Michael Kim, partner at Rustic Canyon Partners.

 “Capella is also utilizing its strong intellectual property portfolio to expand its product line to meet growing market needs across a broader range of network applications. Our best-of-breed core product capabilities can be applied flexibly and cost-effectively to serve evolving IP network requirements”, said Kip Sheeline, Managing Partner of Levensohn Venture Partners.

 About Capella Intelligent Subsystems

Capella is the industry leader of wavelength selective switch (WSS) technology for use in reconfigurable optical add/drop multiplexers (ROADM) and optical cross connect (OXC) applications. Capella's patented WavePath® products provide the best performing WSS on the market offering dynamic, remote reconfigurability with fully integrated optical channel monitoring (OCM) for simplifying network operations and planning, while dramatically reducing costs. Capella's products are used in both metro and long haul applications. Founded in 2000, Capella is a privately-held company located in San Jose, California. For more information, go to www.capellainc.com.

 Contact:

 Capella Intelligent Subsystems

Kenneth J. Falta

VP of Sales and Marketing

Tel: +1-408-360-4241

kfalta@capellainc.com

www.capellainc.com


Stepping Out Communications

Lisa Copass

Tel: +1-925-253-8445

lisa@steppingoutcomm.com

The lab inside Serious Materials' Sunnyvale headquarters resembles a kitchen. There's a mixer, a milkshake-making machine and a row of cake tins on a shelf filled with brown powders of various hues.
 

Lab technicians - mostly scientists with advanced degrees - measure and mix, pour and stir - all in search of a better recipe. But not for a cake. For drywall. Greener drywall. One that takes 90 percent less energy to produce and creates less greenhouse gas as a result. And one that could have a tremendous effect on the fight against global warming.

"The amount of CO we can impact is greater than any car company," says Kevin Surace, Serious Materials' chief executive officer. Making drywall is a hugely energy-intensive process, accounting for about 1 percent of U.S. energy consumption and 25 billion pounds of CO in the air each year. In contrast, his greener drywall, EcoRock, is a zero-emissions product. The company plans to begin selling it in summer and ramp up to full production by fall.

Three venture capital firms - New Enterprise Associates, Foundation Capital and Rustic Canyon Partners - recently put down a $50 million bet that Serious Materials will find a big market for this and other green building materials, such as ultra-energy-efficient windows. That's a huge investment, but they're betting on a big payoff in the $1.3 trillion-a-year U.S. construction industry.

"This is going to revolutionize the (building) materials business," said Ted van der Linden, director of sustainable construction for DPR Construction, a $1.6 billion contractor based in Redwood City. DPR hasn't agreed to buy EcoRock yet, van der Linden said, but his company will test it. DPR has seen green building projects - ones that use Leadership in Energy and Environmental Design (LEED) standards - grow from less than 1 percent of its revenue in 2004 to 53 percent in 2007.

Those numbers don't surprise Tom Hicks, vice president of LEED at the U.S. Green Building Council. His organization has certified 1,184 green building projects nationwide, including five in San Jose. "The annual U.S. market in green building products and services was over $7 billion in 2005 and is now over $12 billion and is expected to continue to increase," he said. Five years ago, according to Hicks, consumers and contractors had trouble finding environmentally friendly paints and compact fluorescent light bulbs. Now even big-box home-improvement retailers offer them and similar products.

As Serious Materials' CEO, Surace brings a high-tech background (Perfect Commerce, General Magic) to the construction business. For a guy who builds and sells drywall and windows, Surace sounds an awful lot like Al Gore. Ask him about his company, and he'll launch into a 20-minute treatise on global warming that focuses on the construction industry, the materials and shipping used to build homes and offices, and the inefficient operation of those buildings, as huge contributors to carbon emissions. "The big kahuna is CO production in buildings," he said, filling a white board with the words "cement. glass. metal. drywall."

Drywall is made using a process invented in 1917. The gypsum, the main ingredient in drywall, must be calcined, or super-heated, using coal, oil or natural gas as the source of the energy. Depending on who does the math, anywhere from 25 percent to 45 percent of drywall cost is energy.

EcoRock doesn't need to be calcined. Its components - the specific formula is a company secret and a reporter was asked not to write down the name of the ingredients on various bins and buckets in the lab - are mixed. A foamer is added, the mix heats up, cools down and then is set into a usable block of drywall. Surace expects EcoRock to sell for about what it costs to buy premium drywall. In the United States, 40 billion to 50 billion square feet of drywall is made each year.

Serious Materials already has an existing business, the Quiet Solution line of noise-reducing wood, drywall, glue and other products that generates $20 million a year in revenues. So, as opposed to a start-up that must launch both a company and its initial product, Serious Materials already knows the people who buy and use building products. Its products are sold by 4,000 dealers.

Production of the Quiet Solution products was recently moved to Newark. EcoRock and other green products will be made in Sunnyvale as well as at a planned factory in Syracuse, N.Y. The company is about launch a new product with new financing at an opportune time. The building industry is facing "more and more pressure" to change its ways, to adopt more green practices and use more green materials, said Tristan Korthals Altes, managing editor of the Environmental Building News newsletter. That's because, according to the U.S. Green Building Council, buildings account for 65 percent of U.S. electricity use and produce 30 percent of the country's greenhouse-gas emissions and 30 percent of its waste.

Contact Matt Nauman at mnauman@mercurynews.com or (408) 920-5701.

Neal Hansch
Rustic Canyon Partners
Office: (650) 654-8503
Mobile: (650) 346-0460
www.rusticcanyon.com