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ZeroG Wireless is announcing today that it has raised $17 million in a second round of funding for its business of designing embedded Wi-Fi chips. This company is looking for the day when billions of everyday gadgets and sensors are connected to the Internet.

John Cummins, chief executive of the Sunnyvale, Calif.-based company, says it’s able to get off the ground because it’s going the opposite direction of other wireless broadband chip makers. Others are focused on the 3G and 4G networks of the future by building chips that will be used in phones and laptops, but those chips often consume a lot of power in their efforts to deliver wider range and faster connection speeds.

ZeroG wants to extend Internet connectivity to everyday objects. The company is targeting Wi-Fi connectivity at the embedded market, meaning it will go into as yet unconnected sensors and other simple gadgets. The company emphasizes low cost and low power in its chip designs, which can be grafted into a wide variety of electronic systems.

After a pretty dry year, chip start-ups are coming out of the woodwork. Recent fundings include Silicon Blue, Advanced Micro-Fabrication, Movidia, Samplify Systems, Achronix, and Altair Semiconductor. Most chip companies take a lot of money, which is why venture firms have shied away from the deals.

Embedded Wi-Fi chips aren’t quite as cheap as radio frequency identification tags. For instance, an Internet stack of software runs on the chips to enable Wi-Fi. But that will enable applications that RFID chips are being used for, such as sending sensor data to a central server. Cummins considers this to be the “long tail” for Wi-Fi technology. As the wireless chips get cheaper and cheaper, they can bring connectivity to more devices, enabling a sea of interconnected digital devices known as “the Internet of things.”

“In five years, it will be hard to find a device that is not connected to the Internet,” Cummins said.

It may sound like it’s undertaking a gargantuan task, but the company has a credible crew. It was founded in 2006 by Tom Lee, a Stanford engineering professor who previously founded Matrix Semiconductor, a company that sought to build memory chips in three dimensions. SanDisk bought it in 2005 for $250 million. But much of Lee’s expertise has been in wireless radio.

Lee took a year off from Stanford to start ZeroG Wireless until Cummins joined as CEO in January 2007. Now Lee splits his time between the two jobs. Cummins has 20 years of management experience, including six years at Agere Systems and Lucent Microelectronics.

Battery Ventures led the round. Morgenthaler Ventures and Greylock Partners, which invested in the first round, also participated. Another investor is Miven Venture Partners. The company will use the round to bring its product to market, expand its sales, and build out its executive team. Alex Benik of Battery Ventures will join the board. Altogether, the company has raised $30 million. It has 40 employees.

Cummins said that he expects to launch the company’s first products in the first quarter of 2009. While it’s been tough to start chip companies, Cummins said he has been frugal and it isn’t as hard to design a simpler chip that goes after a wide range of markets.

Potential competitors include Atheros, which developed a tiny Wi-Fi chip that was used last year in the Eye-Fi memory cards for cameras. Those cards can upload pictures directly to the Internet because of Atheros’ Wi-Fi connectivity. Other potential competitors include other makers of Wi-Fi chips, such as Broadcom. Another Campbell, Calif.-based low-power Wi-Fi chip start-up is G2 Microsystems.

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