As reported last week, the big news that came out of the third quarter MoneyTree survey — produced by PricewaterhouseCoopers (PwC) and the National Venture Capital Association based on data from Thomson Financial — is that a few niches within the telecom sector saw significant interest from investors. Four of the Top 10 deals sealed in the third quarter were with telecom companies.
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That’s a good sign for the telecom industry, which hasn’t seen a growth in investment levels since mid-2002.
Browse through the data in our venture-capital database.
However, the majority of investor interest in the telecom sector is centered on companies designing the infrastructure to build a new generation of consumer-oriented services and applications, such as Limelight Networks with its digital media content distribution network.
That means enterprise IT won’t likely see the benefits of these investor dollars for a few years.
Consumer-oriented offerings “are what’s driving these investments, that’s certainly where the demand is," says Tracy Lefteroff, global managing partner of PwC’s venture capital and private equity practice. In a few years, once these infrastructure technologies such as wireless messaging services and mobile high-bandwidth delivery services are proven, they will probably trickle down into the more-conservative enterprise domain, he says.
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The software sector — a perennially hot area for venture capital investment — saw a significant decline during the third quarter with deals totaling 19% less than they had in the previous quarter. A lack of interest in enterprise-focused technology can again be cited, because the market for corporate software is so mature that there’s little room for newcomers, Lefteroff says. Much of the software-related funding activity during the third quarter went to start-ups with whiz-bang Web 2.0-ish products and services aimed at the consumer.
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