* 'Net communications start-ups receive $216 million investment in Q3
Start-ups focused on Internet communications had a strong showing in terms of attracting additional rounds of venture capital dollars during an otherwise slow third quarter of 2004.
Altogether, venture capital firms invested $216 million in 20 start-ups in the Internet communications sector, according to the MoneyTree Survey, a quarterly analysis of venture capital investments compiled by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
The third-quarter investment is more than double that of the second quarter of 2004, when 19 deals worth $101 million were finalized in this network industry segment. In the first quarter of 2004, 21 Internet communications start-ups received a total investment of $156 million.
While ISPs fared well, venture capital investments across the network industry dropped during the third quarter. Overall, venture capitals invested $2 billion in 304 network start-ups including ISPs and other carriers, network equipment manufacturers, software developers and service providers.
The network industry’s third quarter results were down from $2.7 billion invested in 409 start-ups during the second quarter of 2004 and $2.6 billion invested in 371 start-ups during the first quarter of 2004.
Much of the success the Internet communications sector enjoyed during the third quarter of 2004 can be attributed to one company: Vonage. This Edison, N.J. start-up provides telephony services across existing Internet connections. Vonage received $105 million – the largest single investment in the network industry – in its fifth round of venture capital investment.
Four other major deals for ISPs were:
* $20 million invested in Wayport, an Austin, Texas start-up that installs and operates Internet connections in the hospitality industry. This was Wayport’s seventh round of venture capital investment.
* $7.5 million invested in Netiface Communications, a Norcross, Ga., start-up formerly known as TeleCommute Solutions. Netiface offers fully managed IP VPN services. This was its seventh round of venture capital investment.
* $3 million invested in Speakeasy, a Seattle, Wash., broadband service provider. This is Speakeasy’s fifth round of venture capital investment.
* $2.5 million invested in Airimba Wireless, a Clemson, S.C. start-up formerly known as ClearSKY Networks. Airimba provides secure, high-speed wireless Internet access. This was Airimba’s third round of venture capital investment.
Look for more information about venture capital investments in the Internet communications area in the next newsletter.
