With an influx of new spectrum, new networks coming online and new services to run over those networks, one might say that venture capitalists are backing both the tortoise and the hare to win in wireless.
The interest in the quick-changing, what’s-hot-next consumer application space isn’t new, but infrastructure often is relegated to a dark-horse position in the industry. However, the recent spectrum auctions along with seeking network support for new services have given the space new momentum.
This May, according to a report by Rutberg & Co., wireless companies received $241 million in venture capital funding – and more than 55% of that money went to companies working on carrier or enterprise infrastructure. Another 20% of the money funded projects in the consumer application space.
No more paper price tags
In the enterprise infrastructure space are companies such as San Jose-based Altierre Corp., which wants to use wireless and RFID technology to replace retailers’ paper price tags.
Altierre received $8 million in its most recent round of funding, bringing its Series C total to around $30 million. The company, which has raised a total of $60 million, designs wireless systems for retailers, with a focus on grocery stores, to replace the paper price tags and thousands of manual price changes each week, which traditionally have been a point of pain in that industry. Beyond the inconvenience to customers of being charged an incorrect price when the current system fails, grocery giant Safeway Inc. recently paid $2.7 million to settle a lawsuit brought by six California counties based on pricing inaccuracies that led to customers being overcharged.
“They spend a bunch of effort in every retail store trying to basically solve this problem, doing it with paper and labor,” said Sunit Saxena, chairman and CEO of Altierre. “We’re not looking at this as a wireless problem, but an information problem.”
The electronic tags can display not only pricing, but messaging for customers, according to Saxena. Altierre developed its system in partnership with retailers, and Saxena said that its Electronic Shelf Tags are being used in several undisclosed stores and expects wider use this year, with major rollouts next year.
Back to backhaul
On the carrier infrastructure side are companies such as Telecom Transport Management Inc. which recently raised $20 million in venture capital funding to continue its capital expansion. The company uses microwave technology to provide backhaul services to wireless carriers; the backhaul market is one expected to undergo rapid growth in conjunction with the use of more data-heavy applications.
Mark Hamilton, CEO of TTM, says the company began looking at the backhaul space about five years ago, before data growth really took off – and well before backhaul came to be seen as a possible constraint on its growth.
Hamilton said that awareness of the need for additional backhaul capacity has been growing slowly in recent years, then “increased dramatically over the last six-12 months.”
Some of the factors, he said, were the introduction of Apple Inc.’s iPhone – which showed that a device could radically change how consumers use wireless services – as well as the spectrum auctions, which are expected open up more opportunities for broader networks to carry bandwidth-intensive services such as video that require more backhaul capacity.
“People have started to really see the growth in data that is going to take place, and that’s why it’s been attractive to shareholders and why they have made the investment in it,” said Hamilton.
Brian Clark, general partner at M/C Ventures, agreed that exploring wireless or wired solutions to the lack of backhaul is an area of interest for VC companies.
“We’ve been spending some time looking at how you solve the backhaul problem as data continues its growth,” Clark said. “Solving the backhaul bottleneck is important.”
Integrating channels
While infrastructure heats up, consumer applications continue to draw investment as well – since something has to run over those speedy new networks. KPMG L.L.P. recently surveyed about 300 leaders in the venture capital and digital media space, and the survey results show that the participants expected the mobile sector, along with technology enablers, to receive the most VC investment this year.
“A lot of the excitement is around mobile,” said Packy Kelly, partner and co-leader of KPMG’s venture capital practice. Kelly added that the survey participants expected that rather than wireless operators or traditional media companies, social media sites are expected to be best able to leverage the activity in social networking.
The survey respondents said they overwhelmingly believed that channel integration across TV, PC and mobile was possible, and that while social networking applications would dominate the market in 2009, 76% of them expected the mass adoption of mobile video in the next one-to-three years.
Clark also said that interesting developments are going on in consumer adoption of wireless access to e-mail, and that he expects wireless e-mail to eventually become as commonly used as voice is now.
“More than just having voice on the go, e-mail is going to be just as important over the long run,” Clark said. “The e-mail needs of consumers, not only when they’re at home, but on the road, is going to be a given down the road.”
The iPhone also continues to impact the consumer application space and VC investment there, with Kleiner Perkins Caufield & Byers announcing in March the creation of the $100 million iFund to “back innovators pursuing transformative, high-impact ideas with an eye towards building independent durable companies atop the iPhone/iPod touch platform.”
