* No ISPs to be seen in early-stage investment awards
The network industry doesn’t need any more ISPs. That’s apparently what venture capitalists think, according to an analysis of investments in the network industry that were reported during the third quarter of 2004.
The network industry doesn’t need any more ISPs. That’s apparently what venture capitalists think, according to an analysis of investments in the network industry that were reported during the third quarter of 2004.
Venture capital firms invested just under $12 million in four early-stage Internet communications start-ups. However, none of these start-ups was a true ISP offering Internet access, VPN or application-oriented services.
This data is from the MoneyTree Survey, a quarterly report on venture capital investments compiled by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
The MoneyTree Survey reports that venture capital firms invested $216 million in 20 start-ups in the Internet communications sector. Of those deals, four were considered early-stage investments, nine were considered expansion-stage investments and seven were considered later-stage investments.
The early-stage investments were:
* $8 million invested in Anagran, a Redwood City, Calif. start-up developing a small fast-flow CPE router. This is a first-round investment.
* $2 million invested in an undisclosed start-up in Weston, Mass. No information about this deal was provided.
* $1.23 million invested in Manystreams, a Santa Clara provider of integrated broadband communications products and services. This is Manystream’s fourth round of venture capital investment.
* $530,000 invested in Covelight Systems, a Cary, N.C., provider of infrastructure solutions. This was the fifth round of investment in Covelight, which is formerly known as Xactional.
Despite these deals, venture capitalists seem wary about backing entrepreneurial ventures in the Internet communications space. For example, they provided no seed financing in this sector. Also, the four early-stage deals that were finalized represent only 20% of the overall deal volume. Industry analysts like to see 30% or more of the venture capital investments in an industry segment going to finance new ideas and companies.
Overall, venture capitals invested $2 billion in 304 network start-ups including ISPs and other carriers, network equipment manufacturers, software developers and service providers. Of these deals, 91 were early stage investments and seven were seed investments, representing just shy of 30% of the deals.
