Quarterly VC survey: Telecom investments up

NETWORK WORLD NEWSLETTER: CAROLYN DUFFY MARSAN'S ISP NEWS REPORT
08/24/05
Today's focus: Quarterly VC survey: Telecom investments up

Dear networking.world@gmail.com,

In this issue:

* U.S. VCs pumped $562 million into telecommunications start-ups
  in Q2
* Links related to ISP News Report
* Featured reader resource
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Today's focus: Quarterly VC survey: Telecom investments up

By Carolyn Duffy Marsan

U.S. venture capital firms invested $562 million in
telecommunications start-ups in the second quarter of 2005 - the
largest investment in this segment of the high-tech economy in
two years.

Indeed, telecommunications ranked third in terms of venture
capital investments last quarter after software and
biotechnology, according to the MoneyTree Survey compiled by
PricewaterhouseCoopers, Thompson Financial Venture Economics and
the National Venture Capital Association.

Overall, venture capital firms invested $5.775 billion in
high-tech start-ups in the second quarter of 2005. Of that
amount, $1.279 billion went to software companies and $1.122
billion went to biotechnology companies.

The $562 million invested in telecommunications represented 50
deals, ranging in size from $50,000 to just under $200 million.
Telecom investments were up 54% over the first quarter of 2005,
when venture capital firms invested $364 million in this
segment.

VoIP carrier Vonage received $199 million in its sixth round of
financing, which was the second largest venture capital deal of
the quarter. Vonage has raised a total of $393 million since the
second quarter of 2001.

Other major telecom deals in this quarter include: $35 million
invested in SOMA, a San Francisco wireless service provider;
$30 million invested in Motricity, a Durham, N.C., mobile
content provider; and $18.5 million invested in Mintera, a
Lowell, Mass., provider of Internet backbone infrastructure.

"The telecom sector is being driven by wireless and Internet
communications," says Kirk Walden, national director of venture
capital research at PricewaterhouseCoopers. "With regular
telecommunications, there is nothing going on."

Walden says that the Vonage investment is notable because this
start-up could have used an IPO to raise money but instead chose
venture financing.

"It's clear that Vonage doesn't want to be held to quarterly
earnings reports," Walden says. "The management wouldn't have
given up that much stake in the company if it weren't for a
fundamental strategic decision about how they want to spend that
money. They will not have to worry about profitability by
getting the venture money like they would if they had gone to
the public markets."

Walden says that Vonage's approach is a flashback to the late
1990s, when Internet start-ups raised huge sums of venture
capital financing and spent it on gaining market share rather
than achieving profitability.

"It is true in any industry that the first or second guy to
achieve dominant market share wins," Walden says. "Vonage was a
smart financing play. Many people in the industry are positive
about that deal."

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Today's most-forwarded story:

IT staff shortage looming
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_______________________________________________________________
To contact: Carolyn Duffy Marsan

Carolyn Duffy Marsan is a senior editor with Network World and
covers emerging Internet technologies and standards. Reach her
at <mailto:cmarsan@nww.com>
_______________________________________________________________
This newsletter is sponsored by Ciena
NetworkWorld Special Report - The Adaptive WAN: The factors
driving WAN evolution

A combination of business and technology trends are changing the
demands on the enterprise WAN. This NetworkWorld Special Report
explores some of the key business and technology trends that are
driving and enabling the evolution of the enterprise WAN and how
the enterprise WAN can become adaptive to support these trends.
http://www.fattail.com/redir/redirect.asp?CID=110868
_______________________________________________________________
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FEATURED READER RESOURCE
IT STAFF SHORTAGE LOOMING

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