NEW YORK-Venture-backed investments in the second quarter reached an all-time high of $3.7 billion, breaking the prior record of $3.3 billion set in the last quarter of 1997.
These investments increased by 26 percent from the $2.99 billion reported for the second quarter of last year, according to the Price Waterhouse Coopers Money Tree Survey.
“The pace of investing is on track to break 1997’s full-year record of $11.6 billion,” said James D. Atwell, managing partner of the venture capital practice in PWC’s Global Technology Industry Group, Austin, Texas.
“The raw dollars are particularly impressive considering the focus of our new Money Tree survey on straight equity investments in entrepreneurial companies, [excluding] leveraged and subordinated debt.”
The $726 million in second-quarter investments in telecom/wireless venture capital investments represented a 46-percent increase from the same period a year ago, said Kirk Walden, national director of the survey. This sector is on track to meet or exceed its 1997 total of $1.4 billion.
“In fact, telecom/wireless grew faster than the two larger, broader categories of all software, (which grew by) 35 percent, and all communications, (which grew by) 34 percent,” he said.
“Venture capitalists continue to see above-average, even extraordinary potential in the industry.”
Companies involved in a broad array of enterprises related to wireless/telecom received venture-capital funding last quarter. However, there was increased emphasis in the business-to-business area.
“Enabling products for the industry itself, like specialized semiconductors, routers and software attracted significant funding,” Walden said.
“The growing importance of data communications and the Internet helped fuel the increase.”
Leading regions for telecom/wireless venture-capital investments last quarter were, in order of importance: California’s Silicon Valley, the Washington, D.C., metropolitan area, the Southeast and Texas.
This geographic dispersal indicates “the pervasive nature of the technologies and their applications across the country,” Walden said.
Across industry sectors, the total number of companies receiving funds increased by 11 percent to 760 from 684 a year earlier. At the same time, average funding per company increased by 13 percent to $4.92 million from $4.37 million a year ago.
“Contrary to some … conventional thinking, the rise in average funding, which implies a rise in valuations, has not been offset by a decrease in the number of companies (funded),” Atwell said.
“Both measures increased to record levels. There simply has never been a better time to be an entrepreneur.”
Some 34 of the 77 wireless/telecom companies receiving venture-capital investments during the second quarter of this year garnered more, often well above, the overall average investment of $4.92 million.
The Southeast, particularly Florida, was the focus of a significant number of exceptionally large wireless-related venture-capital investments last quarter. Triton Network Systems Inc., an Orlando, Fla., wireless network systems provider, received $26 million in second-stage financing, the single-largest wireless/telecom investment for the quarter.
Another big Florida dollar-getter was Daleen Technologies, a Boca Raton-based developer of computer products for Internet commerce and wireless transportation-related applications. Daleen received $15 million in fourth-stage financing. Utility Partners, a Tampa developer of mobile data software for utilities, garnered $9 million in first-stage financing.
Next door in South Carolina, Greenville-based Carolina PCS, a wireless carrier, gained $10 million in second-stage venture-capital funding. Conxus Communications, also headquartered in Greenville, received $850,000 in follow-on financing for its wireless messaging business.
Moving up the Atlantic Seaboard to the region Pricewaterhouse Coopers calls “DC/Metroplex,” all four wireless/telecom companies that received venture-capital funding last quarter beat the $4.92 million individual investment average. The single-largest dollar recipient here was Comm Site International Inc., a Vienna, Va., company providing wireless communications transmission and antenna facilities. Comm Site received $14.5 million in follow-on financing.
For all industry sectors, Silicon Valley maintained its longstanding lead, attracting $1.24 billion, or one-third of all venture-capital investments nationwide during the second quarter. This dominance also was reflected in wireless/telecom since 27 of the 77 companies in this sector to receive this type of financing last quarter are located in this region.
The single-largest wireless/telecom dollar recipient here was Mobex Communications, a Lafayette, Calif., developer of wireless communications networks for specialized mobile radios. It received $15 million in third-stage financing.
The venture-capital survey for the second quarter of 1998 was the first to be released after the merger of Price Waterhouse and Coopers & Lybrand. The results are based on responses from 496 venture capitalists and the 225 co-investors they identified. Further information can be obtained on the Internet at: http: www.pwcmoneytree.com
