SUNNYVALE, Calif.—Stretch, a manufacturer of software configurable processors, including chips that serve as the guts for H.264 compatible DVRs and cameras, announced in early November it has raised an additional $10 million in mezzanine funding. The round was funded by current investors Worldview Technology Partners, Oak Investment Partners, and Menlo Ventures. The company has now raised roughly $126 million all told, with its last $15 million round coming in January.

“We took the money a little earlier than we needed it,” said Craig Lytle, Stretch CEO. “The $15 million could have gotten us through January, maybe a little further. But the investors were looking for a particular milestone, which was significant revenue, and we reached that milestone of having significant revenue for the first time in Q3.”

Previous revenue had come from developmental work for customers, and some smaller customers have been in full production for a year and a half, Lytle said, but “Q3 was the first quarter we had major players in full production.”

Going forward, the new funds will largely be used for R&D, Lytle said, further software development, new reference designs, and working on what will be the company’s third generation products. He expects the company to be cash-flow positive before the end of the first half of 2010: “And that’s just based on current customers,” he said.

R&D efforts will be focused on leveraging the H.264 SVC (scalable video codec) compression standard, Lytle said. “We believe that SVC will be the predominant encoding standard soon for the industry,” he said. “We have many customers that are basing their new products on SVC.” This new flavor of H.264 is attractive, he said, because it allows the recording of multiple versions of the same video simultaneously in layers. So, he said, a camera with storage at the edge could use facial recognition technology, for example, to record high resolution images of faces while at the same time recording 30 fps of lower resolution video.

Also, all chips coming out from Stretch going forward will be both ONVIF and PSIA compatible, though Lytle said Stretch wants both standards to address file management as quickly as possible, an effort which PSIA has begun in earnest (see related story, page tk). “Both of these were developed for cameras, and I get that,” he said, “but they need to be ported to work in the DVR space, and a lot of cameras are going to have a flash-based file system on the inside, and look like DVRs on the inside, too.”