VentureBeat

Agito Networks has figured out a way for enterprises to embrace WiFi based mobile phones even though wireless carriers haven’t made it easy to integrate WiFi with the cellular phone system. Thanks to its clever solution, the company is announcing today that it has raised $13 million in a second round of venture capital.

The Sunnyvale, Calif.-based company hopes to make it easier for big businesses to adopt smart phones with WiFi access for employees who have to deal with poor reception inside buildings and high cellular network costs.

Castile Ventures led the round. ITX International Holdings and original investor Battery Ventures also participated. The company also said it has named David Leonard, a former Cisco executive, as its executive chairman.

Leonard has taken over running the company since its previous CEO, Ron Markovich, left recently. Leonard said the company is searching for a new CEO who can scale the business and that he hopes to make that hire within the next three months.

Agito puts its Roam Anywhere Mobility Router into a company’s data center. The router figures out how to instantaneously switch a call from a WiFi network to a cell phone network, depending on which network has better reception and which is more cost effective. The technology is known as “fixed mobile convergence.”

The router lets someone with a WiFi cell phone access the company’s address book or internal phone extensions easily. The aim is to let callers receive phone calls inside buildings where it’s cheaper to use a WiFi network and likely that WiFi reception will be better than cellular network reception. The company said it takes a matter of 100 milliseconds or less to hand off a call from the cell networks to WiFi. Normally, the handoff is rocky with similar devices.

The technology should appeal to workplaces such as hospitals that have mobile workforces and often have trouble getting reception inside buildings or in basements.

ITX’s specialty is international markets, and that’s one reason it participated in the round. Agito plans to use part of the money to expand overseas and it will tap ITX’s contacts. Agito was founded in April, 2006. Pejman Roshan, Agito’s co-founder and vice president of marketing, said that the timing is good for this kind of product because 60 percent to 70 percent of enterprises have now deployed WiFi networks. Also, Nokia, Research in Motion, Apple and others have now deployed handsets that can access WiFi networks for data networking.

But the carriers have been reluctant to let users bypass the cellular networks by using the WiFi networks for calls. By making it easy to switch calls between networks, Agito bridges the gap and saves money for corporations, Roshan said. Rivals include Stoke, which also received a round of $41.8 million in a fourth round of funding recently. We wrote about Stoke earlier this year.

While WiFi is subject to hacking, Roshan said that Agito makes it easy to handle calls securely because the enterprise phones are often centrally managed via enterprise servers. Over time, the company hopes to add new features related to mobile video, instant messages, and push-to-talk (walkie-talkie service).

To date, the company has raised about $20 million. Battery Ventures funded the first round in December, 2006. Agito has about 45 employees. Roshan said the fundraising process wasn’t too difficult and the company received multiple offers.

[Agito is a nominee for best mobile comany at MobileBeat, our mobile conference on July 24. Just a few days left to vote for your favorite mobile application or service company.]

Funambol has raised $12.5 million in venture funding to fuel its open-source mobile messaging software business. On top of that, the company is announcing today that it’s landed AOL as a customer for its mobile synchronization software.

Funambol raised its second round from Nexit Ventures (which led), Castile Ventures, Walden International, and HIG Ventures. The new financing brings the total raised by the company to $25 million. The new funds will help the company expand in Europe and Asia.

Fabrizio Capobianco, CEO of the Redwood City, Calif.-based company, said Funambol’s software has been downloaded more than two million times, making it the top open-source mobile software. Mobile phone carriers put the “push email” software on their phones to create a free Blackberry-style functionality. With the software on a phone, users can have their corporate email forwarded to them on the go. That function has previously been the domain of high-end smart phones.

“We make email accessible on the 98 percent of phones that don’t have email capabilities,” Capobianco said.

However, there are plenty of other companies offering similar email capabilities, including Flurry.

He said that the company makes its money through its carrier edition, which can scale to millions of users.

Capobianco said the AOL deal would help AOL synchronize AOL’s online PC and mobile mail services. In addition, AOL recently selected Funambol to help synchronize its online and mobile mail services using Funambol’s open source software and its scalable synchronization platform.

The company’s name comes from the Italian word for tight rope walker. The company has 75 employees and most of its development team is in Italy. With the new funding, Nexit partner Michel Wendell joins Funambol’s board of directors, and Castile general partner Carl Stjernfeldt joins the board as an observer.

Updated

Venture investment fell 8.5 percent during the first three months of 2008 compared to the final quarter of 2007, according to the new MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association. The report is a big, comprehensive study that reinforces what everyone already kind-of knew, or at least suspected. It tracked a total of 922 venture deals worth $7.1 billion — in terms of dollars, that’s an 8.5 percent drop.

In a conference call discussing the report, NVCA Vice President John Taylor emphasized that investment tends to be cyclical, and that the first quarter of the year tends to have less investment than the second or the fourth. But Q1 2008 was also down from the $7.5 billion in venture money invested during the same period last year.

Nina Saberi, a partner at Castile Ventures, said one of the most significant factors that will continue to hurt venture investment is the decreasing number of IPOs — according to the NVCA, there were only five IPOs during the first quarter of 2008. The acquisition market is weakening too, Saberi said, which is putting downward pressure on valuations. All of this means venture firms need to support startups for a longer period of time before their exits, and that firms therefore need to be more careful with how they invest.

First-time deals also fell 18 percent to $1.6 billion invested in 294 companies. Those deals accounted for 23 percent of all venture dollars during this period.

“We see from an early stage investing point of view, the economic slowdown has had an impact and perhaps people are being mindful of the economic slowdown,” Saberi said. “But, at the same time, the effects of it are milder than you might imagine from listening to the evening news.”

The report also breaks the deals down by industry. Biotech received the most money, with $1.27 billion going to 126 deals, but software had the most deals, with $1.26 billion in 234 financings.

Update: Dow Jones VentureSource has broken down Q1 investment by region (see screenshot, left). Not surprisingly, the San Francisco Bay Area saw the most money invested, with $2.56 billion in 213 deals. Southern California came in second, with $672 million in 63 deals.