Israeli WiFi chip-maker Celeno Communications  said on Monday it had received $16 million in a funding round led by networking giant Cisco.

Three-year-old Celeno, which competes with much larger Wi-Fi chip-makers such as Broadcom, and Atheros, has carved out a niche in the in-home WiFi market by specializing in the wireless transport of HD-quality TV streams around the home.

In-home WiFi has been dominated by web surfing, but the penetration of WiFi, the emergence of IPTV, and the growth in the number of TVs per household have made the wireless transport of TV streams around the home more attractive, particularly to IPTV providers.

“Celeno was founded on the vision that somehow someday someone would want a Wi-Fi system that could efficiently carry video around the house,” said Lior Weiss, Celeno's vice president of marketing.

But there has been no groundswell of consumer demand for video transport via WiFi as there has been for broadband communications.

“There is demand from telecom operators in Europe and Asia where the cost of installation of home communications is significantly lower if they use wireless rather than spend six hours doing a wired installation in each home,” said Charles Golvin, an analyst with Forrester Research.

Home networking is changing from simply data transport to a more complex vehicle for moving Internet video from the PC to the TV for better viewing, or listening to downloaded songs on the home stereo rather than on the PC, he said.

“This kind of home networking is now part of what happens when TV service gets installed, and being able to do that wirelessly has a high benefit to telecom operators,” Mr. Golvin said. “I am not sure that it makes that much difference to the consumer whether it's wireless or wired, as long as it works reliably.”

Ra'anana, Israel-based Celeno will use the new cash infusion to upgrade its marketing. The company, which has now taken more than $30 million in investment, markets its chips to companies that make routers, gateways and other devices that are then installed in the home.

Celeno also targets Telco TV carriers who in most cases are the primary customers and demand drivers for the technology.

Cisco acquired its way into the TV distribution business in 2005 when it purchased set-top box maker Scientific-Atlanta for about $6 billion. It also bought Airespace, a WiFi systems maker, for $450 million. (see Cisco Grabs Scientific-Atlanta)

Mr. Golvin expects the Celeno relationship to complement Cisco's consumer-focused WiFi businesses.

Celeno is the latest startup to benefit from Cisco's decision to extend its geographical and technological reach by investing $2 billion in companies outside the United States -- which was once its exclusive hunting ground for VC investments.

In July the networking giant announced a $60 million investment in a VC fund that will bankroll Russian startups involved in technologies that generate demand for Cisco's products and services. (see Cisco to Invest $60M in Russian Startups)

Miven Venture Partners, Greylock Partners, and Pitango Venture Capital also participated in the investment round.