NEW YORK-Venture capital investments in American telecom/wireless companies during the first quarter reached $4.3 billion, an amount equal to the total raised in all industries during the same period a year ago, according to the latest PricewaterhouseCoopers MoneyTree Survey.
Across the board, venture-backed investments hit $17.22 billion, breaking the previous record of $14.68 billion set during the last quarter of 1999. This comprised a 400-percent increase from the first three months of last year, whereas the telecom/wireless sector’s total represented a 480-percent increase.
In a year-to-year comparison, the number of telecom/wireless companies receiving venture-capital funding also increased last quarter by a substantial 124 percent, to 242, said Kirk Walden, national director of the PWC MoneyTree Survey.
Across sectors, 1,423 companies received venture-backed funding, a 94-percent increase from the total of 732 in the year-ago period. Technology-based companies accounted for $16 billion, or 93 percent of all investments during the first quarter. This represents the highest quarterly dollar amount ever reported by the MoneyTree Survey.
“Technology investments are the driver. For the most part, non-tech is a non-starter,” said Tracy T. Lefteroff, managing partner of the PWC Technology Industry Group’s U.S. venture capital practice.
Each of the 242 telecom/wireless companies in the latest MoneyTree Survey received an average of $17.6 million, more than double the $6.8 million average for venture-capital investments in telecom/wireless businesses during the first quarter of 1999, Walden said. Across the board, the average investment totaled $17.2 billion per company during the latest complete quarter.
About 25 percent of the telecom/wireless companies receiving venture-capital investments during the first quarter of 2000 are in their formative stages and obtained either seed or first-round funding, he said. Compared with the last quarter of 1999, fewer later-stage investments were made.
“Venture capitalists continue to show their confidence in the sector by investing in these start-ups, thus filling the pipeline with companies of the future,” Walden said.
“Accordingly, as the earlier- stage companies that received funding this quarter begin to mature, we should see big increases later in the year as these companies need more capital to grow … their business.”
Across all industry sectors, formative-stage companies garnered $7.75 billion, or 45 percent of total venture-capital dollars during the first quarter, Lefteroff said.
“Venture-capital firms are looking beyond the state of the public (capital) markets at this instant. The bet is still on the future, not just the present,” she said.
“There is plenty of capital available for later rounds, and investments in formative-stage companies won’t come to fruition for 18-24 months.”
California’s Silicon Valley remained the leader, with $6.1 billion invested in 394 companies. It broke the $6 billion mark for the first time.
“Practically every part of the country showed significant increases. Compared with last quarter, New England, New York Metro, Illinois, Georgia and Texas all grew at a faster rate than Silicon Valley,” Lefteroff said.
New England, second after Silicon Valley, broke the $2 billion mark for the first time, recording $2.4 billion invested in 171 companies. The Southeast placed third, with 129 companies receiving $1.4 billion in venture-capital financing. New York Metro closed out the quarter in fourth place, exceeding $1 billion for the first time, with $1.4 billion invested in 118 companies.
Telecom/wireless investments mirrored the overall trend, “spread all across the country and [touching] practically every facet of the industry,” Walden said.
Knology, a developer of hybrid fiber coaxial broadband networks, received $150 million, the single largest investment in any sector during the first quarter, he said.
Broadband carriers and equipment providers comprised at least a dozen additional venture capital recipients, among them Diveo Broadband Networks Inc. It received $127 million toward development of its fixed wireless broadband Internet services in Latin America. This was the second largest investment in the telecom/wireless sector during the first quarter of 2000.
One of the smallest venture capital investments of the period also went to a fixed wireless provider-$100,000 to GigaTel Wireless.
The latest MoneyTree Survey comprised responses from 582 venture capitalists and the 473 co-investors they identified. Further information can be obtained on the Internet at www.pwcmoneytree.com.
