NEW YORK-First-quarter venture capital investments in wireless and other telecommunications totaled $396 million, nearly double that of the same period in 1997 and triple that of the first quarter of 1996, said Kirk Walden, national director of the quarterly Venture Capital Survey of Price Waterhouse L.L.P., Austin, Texas.
The telecom/wireless sector, which posted a 96-percent increase in investments during the prior-year first quarter, is growing nearly twice the 56-percent average rate of all industries, he said.
Investments in the telecom/
wireless sector were diverse in terms of geography and expertise specialty. Sixty companies in 15 different regions of the United States received funding last quarter. They spanned all segments of the industry, from services to equipment to software to resellers.
California’s Silicon Valley accounted for nearly 40 percent of all software and information investments. However, communications investments were more diverse, with the Washington, D.C., metroplex, New England and New York City metropolitan areas all attracting significant shares.
“As more and more venture capital is directed toward `connecting’ technologies, including the Internet and networking products, telecom/wireless should continue to benefit,” Walden said.
“Entrepreneurs with a good idea, a good business plan and good management should find a ready audience with venture capital firms.”
The interrelated categories of communications and software/ information continued to lead. Together, they accounted for 344 of the 703 companies receiving funding and $1.82 billion of the $3.6 billion invested.
“Software and information broke the billion-dollar mark for the first time, showing the largest increase over the prior year. The communications sector, fueled by telecom and the Internet, jumped 56 percent,” said Donald V. Almeida, managing partner of the Price Waterhouse Technology Industry Group.
“These two sectors alone made up over half of all venture-capital investing.”
In terms of sheer size, three wireless telecommunications-related companies received the largest individual investments during the past quarter: $40 million to Dset Corp., a Bridgewater, N.J., provider of distributed software engineering tools for telecommunications; $33 million to Unwired Planet Inc., a Redwood Shores, Calif., designer of system architecture enabling two-way data communications through wireless devices; and $30 million to Pathnet Inc., a Washington D.C., provider of microwave incumbent relocation for personal communications services carriers. Dset recently went public, and Pathnet, which seeks to become a carrier’s carrier via a nationwide wireless SONET network, has filed to do so.
While some individual companies in advanced stages of development received big-dollar investments, Almeida noted that formative stage companies in all industry sectors collectively received the most funding.
Together, 317 companies received $1.28 billion, or 35 percent of the total. On average, each early-stage company received $4 million, compared with an average of $3.3 million during the same quarter of 1997.
“The continued support of formative-stage companies and the rise in average funding indicate that venture capitalists are still taking a balanced view of longer- term potential,” Almeida said.
“The return on these investments may not be realized for three to four years.”
Of the 485 venture capitalists responding to its latest quarterly survey, Price Waterhouse identified 250 co-investors, so the results reflect the activity of 735 different venture-capital firms.
Further information about the survey can be obtained on the Internet at: www.pw.com/vc.
