NEW YORK-Venture-capital investments in the telecom/wireless sector during the first quarter of this year reached $734 million, more than double the total during the same period a year ago, according to PricewaterhouseCoopers’ Money Tree Survey.
This growth rate far outpaced that of the overall communications industry sector, which grew by 38 percent to $1.15 billion, according to Kirk Walden, national director of the survey.
The telecom/wireless segment also outdistanced the 41-percent increase in overall venture-capital investments. Across industry sectors, venture-backed investments totaled $4.29 billion, up from $3.77 billion in the year-ago first quarter.
Approximately one-third of the telecom/wireless companies to receive venture financing during the latest first quarter were in formative stages, having received either seed or first-round funding.
“Since these early-stage investments can’t be expected to pay off for three to four years, [they] indicate that venture-capital firms are continuing to support entrepreneurs and take a longer view of [their] market potential,” said Walden, based in Austin, Texas.
The 108 telecom/wireless companies that received venture-capital investments last quarter gained an average of $6.8 million each, up from $5.7 million a year earlier.
“The increase reflects the need for emerging companies to ramp up faster and then compete successfully when they go to market,” Walden said.
“While some of the largest deals were wireless service providers, significant investments were made in broadband transmission technology, optical circuitry, equipment and specialized software.”
Two companies shared the top spot as wireless telecom venture-dollar recipients last quarter, each receiving $30 million.
WLL International Inc., Englewood, Colo., received first-round financing. It is part of a partnership that owns 34 percent of two wireless licenses in Brazil.
Tachyon Inc., a Del Mar, Calif., provider of wireless communications systems and services, received follow-on funding.
Formus Communications Inc., a Denver-based local multipoint distribution system company, was the next-largest recipient, having gained $25 million in third-round venture-capital investments during the first quarter. Right behind Formus came Car Toys Inc., a Seattle specialty retailer of car audio and wireless products, which received $21 million in seed capital.
A whisper below Car Toys was Whisper Communications Inc., Santa Clara, Calf., which manufactures and sells wireless backbone, two-way, fixed automated meter-reading technology.
Bell Atlantic Investments led the group providing $18 million to Phone.com Inc., a Redwood City, Calif., company that has developed a system architecture to enable two-way data communications through cellular phones and other handheld wireless devices.
“For all intents and purposes, venture-capital investing has become synonymous with technology investing,” said James D. Atwell, managing partner of PWC’s venture-capital practice.
“Technology companies alone received more money in Q1 1999 than the total investments in all industries in Q1 1998.”
PricewaterhouseCoopers’ Money Tree Survey tracks quarterly venture-capital investments in U.S. companies in all industry sectors. Further survey information can be obtained from the PWC Web site at www.pwcglobal.com.
