NEW YORK-Amid a widespread retrenchment in venture-capital outlays last quarter, investments in the telecommunications and wireless sector fell to $3.7 billion, a $2.2 billion drop that marked the largest quarter-to-quarter dollar decline recorded in this area.
The 37-percent decline was 3 percentage points less than that experienced by the overall venture capital marketplace, which invested a total of $10.1 billion last quarter in all sectors. Although investment has declined steadily since it peaked during the first quarter of 2000, this marks the largest quarter-to-quarter decrease ever in absolute dollar terms, according to the PricewaterHouse Coopers Money Tree Survey, conducted in partnership with VentureOne Corp.
“The decline is not unexpected in light of the pessimistic public markets, though the magnitude of the drop is severe,” said Tracy T. Lefteroff, global managing partner of PWC’s venture-capital practice.
“Venture capital typically lags the public markets so a return to last year’s level of investment is unrealistic. And venture-capital firms are focusing more on assisting their existing portfolio companies, leaving less time for development of new deals.”
However, when compared to the first quarter of 1999, the amount invested in telecom/wireless has increased by 168 percent, said Kirk Walden, national director of the MoneyTree Survey.
In the latest complete quarter, 154 companies in the sector received funding, a 38-percent decrease from the 249 funded companies during the last quarter of 2000 and a 42-percent drop from the first quarter of 2000.
On average, individual telecommunications and wireless companies received $24.3 million, the same as the average deal size during the first quarter of 2000 and a bit more than the $24 million average during the last quarter of 2000.
Formative stage companies undergoing their seed or first round of venture-capital raising comprised 45 percent of all telecom/wireless companies to receive funding last quarter, but only 21 percent of the overall dollars invested.
“Although the total dollars invested in these companies declined significantly from last quarter, the number of formative stage companies receiving funding has remained strong, reflecting the venture capitalists’ continued confidence … in new companies in this sector,” Walden said.
Investments in the sector spanned the country and many facets of the wireless and telecommunications industry. MetroPCS, a Dallas-based wireless operator, received $350 million in venture-backed financing last quarter, representing the single largest such investment in the sector during this period.
Companies involved in optical networking, broadband communications and Internet protocol technologies also gained a substantial amount of venture capital investment last quarter.
AirFiber, a San Diego developer of technology and products for wireless optical networking systems, received $50 million last quarter. Network Design Tools, Morristown, N.J., received $15 million to aid in its development of design tools for optical communications simulation, strategic analysis and wavelength and wireless network design.
M7 Networks, a San Diego provider of integrated mobile infrastructure hosting services, obtained $20 million in venture financing, while Stonebranch, an Alpharetta, Ga., provider of middleware systems integration products, received $2.3 million.
ClickServices, Fremont, Calif., garnered $1.8 million to help finance its provision of wireless Internet and intranet infrastructure solutions for carriers, corporations, Internet service providers, application service providers and dot-com companies.
SmartSynch, Ridgeland, Miss., gained $23 million to help its efforts to provide wireless data solutions to the energy and utility industries.
Gravitate, headquartered in South San Francisco, Calif., received $3.7 million toward its provision of software platforms based on the convergence of the Internet, wireless communications and mobile positioning.
Neither last nor least, an undisclosed venture-capital investment last quarter went to Blue Soft, a Wynnswood, Pa., developer of short-range connectivity solutions. The company’s near-term focus is on the market for Bluetooth.
