Shortly after announcing the design of a new chip that allows wireless base stations to handle far more mobile users — a practical solution to network congestion and dropped calls — PicoChip has brought in $20 million in equity funding to grow fast enough to keep up with demand and stave off an acquisition.

The new PicoChip design beefs up femtocells, small base stations that are networked together via broadband. As a relatively tiny company, based away from the epicenter of the mobile industry in Bath, England, it’s enjoyed considerable success. But it needs to expand, and grow its involvement in LTE communications, a fourth-generation wireless technology that’s becoming an industry standard, to be a long-term contender.

Femtocells themselves are relatively new. Initially conceptualized as in-home base stations, they have started to make more sense in the commercial arena, especially since businesses can much more easily afford them. Residential consumers haven’t been willing to pay monthly subscriptions for femtocell service. Now PicoChip’s new product, which allows 400 people to talk on their cell phones while connected to just one femtocell, could make commercial femtocell sales more logical.

So far only a few of the major carriers have tapped the potential of femtocells, including Vodafone in the United Kingdom. They don’t seem to be worth the cost and complexity in most cases, analysts say. But PicoChip might tip the cost-benefit analysis in their favor, which could bring some of the bigger operators to the company’s door looking for a technology acquisition.

With already a million chips sold, PicoChip has the opportunity to lead a burgeoning market here if it can grow big enough without being snapped up, especially as more people migrate to 4G networks, which are even weaker inside buildings than current 3G networks, also increasing the demand for commercial femtocells — and the chips that can boost their performance.

Founded in 2000, picoChip has raised $110 million to date. Its backers include Intel Capital, Pond Ventures, Samsung, Scottish Equity Partners, Rothschild, Atlas Venture and Highland Capital Partners.

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