NEW YORK-Venture-capital investments in American telecommunications and wireless companies during the first six months of this year have surpassed the total invested in this sector during all of 1998 and 1999 combined.
During the second quarter of 2000, venture-capital funding in telecom/wireless reached $5.7 billion, a 243-percent increase from the same period a year ago, said Kirk Walden, national director of PriceWaterhouseCoopers MoneyTree Survey.
“Overall, the telecom/wireless sector grew at a much faster rate than total venture-capital investments, which grew 156 percent over Q2 1999,” he said.
Venture-backed investments in all industry sectors hit a record of $19.58 billion, eclipsing the prior peak of $17.14 billion reached during the first quarter of 1999.
“The stock market may be uncertain about the economy, but venture capitalists aren’t. They are betting on the future,” said Tracy T. Lefteroff, managing partner of the venture-capital practice in PWC’s Global Technology Industry Group.
“With the established venture-capital firms raising billions in new funds over the last year, that money is being put to work aggressively in the market. Many of these larger funds have investment horizons as long as 10 years.”
In all industries, 1,432 companies received venture funding last quarter, up from 999 a year ago, a 43-percent increase. Of these, 244 companies are in the telecom/wireless sector, a 58-percent increase from the same time frame last year.
Across sectors, the average amount invested last quarter was $13.67 million, a 78-percent increase from the $7.66 million average a year earlier. By contrast, the average amount invested in each telecom/wireless company doubled to $23.35 million from $10.79 million during the second quarter of 1999.
Comparing consecutive quarters, Walden said the average investment received by telecom/wireless companies during the second quarter represented a 32-percent increase from the average posted during the first three months of 2000.
“The increase in average funding as compared to Q1 2000 reflects an increase in companies receiving their second and third rounds of funding while waiting for stock- market conditions to improve before attempting to take their companies public,” he said.
In the wireless space, Denver-based Formus Communications, a local multipoint distribution service carrier, was the biggest venture recipient, getting $175 million in late-stage investments. AirBand Communications Inc., an Addison, Texas, broadband wireless carrier, received $45 million in second-stage financing.
Other big-dollar recipients in the wireless end of telecommunications included: IP Wireless, a San Bruno, Calif., network infrastructure maker, $75.5 million; Tantivy Communications Inc., a Melbourne, Fla., developer of wireless Internet and data access products that integrate with voice communications, $55 million; EveryPath.com Inc., a Santa Clara, Calif., facilitator of Internet delivery over wireless and other devices, $48 million.
LightLogic, another Santa Clara company, received $39.6 million in third-stage financing. Part of its business involves development of optoelectronics. Semiconductor stock analysts are watching this evolving technology closely because it offers the potential to provide mobile communications devices with white screens that are far easier to read than alternatives now available.
Although large venture capital investments make the biggest splash, the underground stream of smaller investments in earlier-stage companies continued. About 40 percent of the telecom/wireless companies receiving venture-backed financing last quarter are in their formative stages, although the total sum invested in them comprised 28 percent of the total, Walden said.
In the under $1 million range, examples of last quarter’s wireless/telecom venture investments included: $500,000 to CreSenda, Los Angeles, whose Wireless Professional Series is a package of hardware, software, wireless service and industry-specific data; $450,000 to Critical Mass Inc., which is assembling a consortium to bid in Federal Communications Commission 700 MHz auctions and build a nationwide wireless network; $200,000 to Mobile Automation, another Los Angeles company, this one developing solutions for managing a mobile work force; and $50,000 to EBA Systems Inc., Milpitas, Calif., a company planning to offer wireless data connectivity among various wireless devices and corporate intranets.
Further details of the quarterly survey can be obtained on the Internet at www.pwcmoneytree.com.
