http://www.networkworld.com/news/2005/050405-moneytree.html
By Cara Garretson
Network World Fusion
05/04/05
Most networking start-ups that received venture capital during the
first quarter of 2005 focus on tried-and-true technology, underlining
investors' continued apprehension to place risky bets on companies in
this sector.
According to a special slice done for Network World of the MoneyTree
Survey by PricewaterhouseCoopers (PwC), Thomson Venture Economics and
the National Venture Capital Association, 335 companies in networking
and related sectors received funding during the first quarter,
totaling $2 billion. That's down slightly from 2004's fourth-quarter
level of 353 companies totaling $2.1 billion. For purposes of this
report, the networking industry is defined as companies in
telecommunications, networking, software, computer and peripherals.
The networking segment "has got a pretty steady-course track record
over the last couple years that suggests sustained investments," says
Tracy Lefteroff, global managing partner of PwC's venture capital and
private equity practice. "The sector is not going away, and is poised
to pick up."
Areas where investors put their money in the first quarter echoed the
trends of the last few years, says Lefteroff. Those areas include just
about anything related to security, as well as wireless
communications, e-commerce systems and network management and
infrastructure.
The first quarter's largest deal was a $108 million investment in
anti-spyware maker WebRoot, led by Technology Crossover Ventures,
Accel Partners and Mayfield, providing evidence that the security
sector continues to be a main attraction for investors. Other top
investments of the quarter include $32 million in CEH Holdings, an
early-stage maker of Internet commerce services, and $30 million in
CSM Wireless, an outsourcer of wireless data translation.
Despite this continuation of investment trends during the first
quarter, some venture capitalists say there are interesting new areas
within the networking market that will be worth exploring this year.
The convergence of wireless and VoIP networks, as well as the meshing
of entertainment and media, will drive the need for innovative
start-ups that can produce technology to support these trends, says
Lefteroff.
While the MoneyTree Survey reports that investments in networking
companies remained flat over the past few years, another venture
capital report issued last week detailed an up tick in deals involving
communications companies. The Quarterly Venture Capital Report by
VentureOne and Ernst & Young late last month, tracked 68 investments
in communications companies during the first quarter of 2005, a level
that hasn't been reached in over two years. This discrepancy among
reports is likely caused by differing definitions of the
communications sector.
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