Livescribe Gets $39 Million to Prove the Power of the Smart Pen

9/9/10Follow @wroush

Smart pens, which can record handwritten notes and drawings and transfer them to a computer for storage, searching, and sharing, have never exactly written their own ticket. The technology behind the devices was first developed in the late 1990s by Swedish firm Anoto Group, and has since been licensed to more than 250 companies around the world for use in record-keeping systems in airports, hospitals, and many other settings. But until Oakland, CA-based Livescribe came along, no smart pen maker had won over large numbers of students, business users, or average consumers.

Now that Livescribe has shown it has a foothold in those markets—selling nearly half a million of its Pulse and Echo smart pens since 2008—venture firms are betting that the company has the winning formula for digitizing note-taking, and are lining up to give the company a final boost toward mass-market success. Livescribe said today that it has raised $39 million in its third and presumably last round of venture funding, bringing the company’s total financing to $100 million.

New investor Crosslink Capital of San Francisco was the biggest contributor to the round. San Mateo, CA-based Scale Venture Partners was second in line, and was joined by Qualcomm, Translink Capital, Presidio Ventures, and Keating Capital, as well as existing investors VantagePoint Venture Partners, LionHart, and Aeris Capital. Crosslink Capital co-founder Michael Stark and Scale managing director Rory O’Driscoll have joined Livescribe’s board. VantagePoint remains the company’s largest investor.

Livescribe Echo smart pen“This support from major strategic investors is a great acknowledgment of our success to date and the opportunities ahead,” said Livescribe CEO Jim Marggraff in a statement. The company said it plans to use the new funds to improve the way data from its pens flows into existing communication and collaboration platforms, and to expand to new markets (it currently sells the pens only in the United States, Canada, the United Kingdom, South Korea, Germany, and Australia, although they’re available in 21 additional countries through Amazon).

But what are the chances that Livescribe’s latest push will finally help high-tech pens take off in a big way? At a time when tablet computing, with its promise of paperlessness, has burst onto the world in a huge way in the form of Apple’s iPad, are students, business users, and other consumers really looking for technologies that will help keep old-fashioned pen-and-paper note-taking alive?

I put those questions yesterday to O’Driscoll, who led Scale Venture Partners’ investment in Livescribe. He shared a number of interesting arguments for why Livescribe’s version of “pen computing” is poised to catch on among more business professionals (who already make up about 70 percent of the company’s customer base) and students (the other 30 percent).

1. Livescribe already has a strong track record. The company’s first product, the Pulse, came out in March 2008, and included an infrared camera for tracking the pen’s position on a page, a small OLED display, a USB connector, and—unlike most other digital pens—a microphone and internal flash memory for recording audio notes and a speaker for … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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