"Smart pen" maker inks big financing

My mother, a retired veteran of the Route 128 tech scene, has a phrase she uses upon hearing about a remarkable new innovation: "That's neat."

Okay, not exactly unique or lyrical, but she says it with a sense of childlike wonderment that lets you know there is hope for this new product after the Techmeme crowd has moved on.

Her latest such utterance came last night, after I laid out the basics of LiveScribe, a "smart pen" maker that today announced $39 million in new venture capital funding. Crosslink Capital led the round, and was joined by Scale Venture Partners, Qualcom, TransLink Capital, Presidio Ventures and Keeting Capital. Return backers included VantagePoint Venture Partners, Lionhart and Aeris Capital.

The goal of a LiveScribe pen is to timestamp and connect audio with written notes. For example: Imagine you're a student taking notes on a lecture, using a LiveScribe pen and LiveScribe "dot paper" notebook. At some point, you jot down: "In 1675, the settlers arrived at [illegible] and made camp." Not a terribly helpful note in my college days, but a LiveScribe pen would have not only recorded the lecture, but would be able to replay the exact moment when that note was taken.

You also can upload your notes to other devices and certain cloud applications.

"In terms of competition, there obviously is the classic pen and paper and then keyboard devices like laptops," says Rory O'Driscoll, a managing director of Scale Venture Partners who has joined the LiveScribe board. "Our bet is that these are all wholly-compatible. There are a whole ton of places where typing makes tons of sense, but others where it doesn't. These different mechanisms can work with each other, not against each other."

O'Driscoll actually first spoke to LiveScribe before its first funding round in 2007, and then again before a follow-up round. He says he balked over concerns about product adoption and LiveScribe's ability to fully integrate into the digital workflow. His "ah-hah moment" came upon realizing that the customer base was expanding far beyond students, journalists and lawyers.

LiveScribe pens sell for between $129 and $169 each, plus the cost of its proprietary paper. It claims to have sold around 500,000 pens so far, meaning that revenue likely exceeds $70 million. O'Driscoll says that he doesn't expect LiveScribe to need another round of private funding, adding that he views the company as an eventual IPO candidate.