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Smartpens are looking like a smart move at Livescribe. The company announced it has raised $39 million in a third round of funding to further build the market for its Echo and Pulse smartpens, which have tiny computers inside them.

First launched in 2008, Livescribe’s smartpens have sold more than 500,000 units. They allow students and professionals to be more efficient, recording lectures and linking the playback of those lectures to written text. If you want to play back a section of a lecture, you simply tap on the written text. You can also use the pens to run writing-related apps and to get quick answers to math problems or translate foreign words.

Jim Margraff, chief executive and founder of Livescribe, said in an interview that the company will use the capital to continue expansion in overseas markets and domestic retailers. He said the company requires a lot of capital because it is vertically integrated, making the smartpens, designing them, creating the software, and crafting the software development kit and app store for the pens.

The larger opportunity is the digital management of written and spoken information. Livescribe’s latest pen, the Echo smartpen launched this summer, can’t yet translate spoken words to typewritten words on the fly. But it does a lot of useful things. Livescribe can connect notes and audio with cloud applications. Margraff said the company also recently acquired Zoomii Learning, a Livescribe developer whose work allows the sharing of notes and audio as an interactive “pencast PDF,” viewed with Adobe Acrobat Reader. Zoomii is one of 9,000 developers creating apps for Livescribe’s platform.

To date, the Oakland, Calif.-based company has raised more than $100 million. Crosslink Capital led the round, joined by Scale Venture Partners, Qualcomm, TransLink Capital, Presidio Ventures, Keating Capital and existing investors VantagePoint Venture Partners, Lionhart, and Aeris Capital. Michael Stark of Crosslink and Rory O’Driscoll of Scale will join Livescribe’s board. Livescribe’s technology is licensed from Anoto.

Margraff said the funding round was oversubscribed. The company has about 90 employees. Livescribe launched at the DEMO conference in 2008. See our video on how the Echo smartpen works below.



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