Monday, March 31, 2008

Reveal Imaging finds $20M in latest financing

By Efrain Viscarolasaga

Scanning the bags of its own executives at Reveal Imaging Technologies Inc. won't uncover any explosives -- as the company's products are designed to do -- but it might reveal some cash.

Last week, the Bedford-based baggage-scanning technology maker closed a $20.3 million round of funding from new and existing investors. According to public documents, $12.3 million of the investment came in the form of convertible debt, while a little more than $8 million came in the form of an equity investment.

The new cash will help the company expand its offering of computed tomography (CT) scanners for airport security, as well as help the company push into new, nonaviation applications, according to CEO Michael Ellenbogen.

The company's traditional product has been used with checked baggage to be stored in the belly of aircraft. But a gate-side version for carry-on luggage has been developed and approved by the Transportation Security Administration (TSA). Those products will be shipping in the next few months, said Ellenbogen.

Fifteen investors were listed in a regulatory filing and include previous backers General Catalyst of Cambridge, Flybridge Capital Partners of Boston (formerly IDG Ventures Boston) and Greylock Partners of Waltham. Reveal also added a new investor, Brown Brothers Harriman of Boston.

Formed in the wake of the Sept. 11 attacks in 2001, Reveal has carved a niche in bringing smaller baggage-screening tech to the aviation industry, which is required to inspect every package and bag going onto an airplane. The company started shipping products in 2005 and has installed 200 units worldwide -- with 70 in U.S. airports.

The technology uses CT scanning and includes automated software, giving it a leg up on traditional X-ray systems. The size and lower cost of the tech attracted the attention of the TSA, and Reveal has been involved with several multimillion-dollar research efforts through the agency.

Despite a seeming overlap with 50-year-old Billerica-based American Science and Engineering Inc. -- which makes X-ray technologies for scanning containers and vehicles for weapons, explosives and other contraband -- one venture capitalist said the companies' products aren't the same.

"They are very different applications and very different technologies, though the end game of spotting dangerous items is the same," said Chip Hazard, a general partner at Reveal investor Flybridge Capital.

Ellenbogen would not reveal details, but said Reveal recently developed a mobile version of the unit used for on-site inspection at high-risk facilities, such as embassies. One such unit has already been shipped to the Middle East, he said.

Security and operational concerns in domestic airports are expected to fuel an 8 percent annual growth rate in the industry over the next four years, making a $10 billion market by 2011.