Wireless is still drawing considerable interest-and dollars-from venture-capital companies, but VC investment overall saw a dip in the number of deals in the first quarter as investors concentrated on exit strategies, including initial public offerings.
Some of the biggest IPOs related to the wireless industry in the first half of the year included venture-backed MetroPCS Inc., which raised more than $1 billion in its IPO; and Clearwire Corp., which raised $900 million from Intel Capital and Motorola Ventures late last year before going public this spring.
Exit strategies
In recent quarters, venture capitalists have had trouble getting companies to the point of initial public offerings, said John S. Taylor, research and financial affairs executive for the National Venture Capital Association. However, renewed strength in the first quarter for the IPO market has meant that VC companies are busy exiting mature investment companies.
“IPOs have been slow up until this year,” he said, adding that based on the results of the first and second quarters of 2007, “this year has been very strong in terms of IPOs, so what we’re seeing now are venture capitalists trying to get companies that have been in maturity, waiting for IPOs, going public right now. That’s what a lot of the focus is on.”
Overall, life sciences and medical equipment categories were the big winners for venture capital in the first quarter-however, according to Taylor, investors are making decisions based so heavily on the individual circumstances of companies that generalizing on the success of certain sectors becomes difficult. However, he added that the first quarter of 2007 saw VC money generally going to more established companies rather than early funding rounds, regardless of industry.
Wireless drives telecom investment
According to the quarterly MoneyTree Report by PriceWaterhouseCoopers and the NVCA based on data from Thomson Financial, venture investment in the telecommunications sector was up 27% from the fourth quarter of 2006, with $588 million going into 63 deals; of that total, wireless accounted for $356 million, or about 60%.
First-time financings saw a decline, but later-stage investing jumped to its highest dollar level since 2000, according to the MoneyTree report. That also meshes with the fact that the number of deals were down, Taylor noted, because later-stage companies typically require more funds per round than early-stage ventures-“like a child in his or her fifth year of college takes a lot more cash,” Taylor said.
WiMAX, social apps top recipients
However, some specific areas of wireless seem to be drawing particular attention, reflective of interests within the industry. Not surprisingly given the interest in WiMAX technology, several WiMAX-focused chipmakers raised substantial amounts of money in the first half of this year. Among those were California-based Beceem Communications Inc. and United Kingdom-based picoChip Designs, both of which closed on fourth rounds of funding. Beceem, which specializes in mobile WiMAX technology, announced in February that it had raised more than $40 million in its latest funding round. PicoChip, which provides designs for 3G as well as WiMAX, closed on a $27 million round late last month. Another mobile WiMAX chipmaker, Altair Semiconductor, also closed on an $18 million second round of venture funding in June.
Also finding success are mobile social networking companies, although they have tended to raise money in smaller amounts. Within the past three months, more than a half-dozen social networking companies have closed on venture-capital rounds. Some of those include mobile gaming community Cellufun (raised a first funding round of $3 million); mobile dating platform provider IceBreaker (raised $7.2 million in first-round funding) and “contest community” Tapatap ($2.5 million in first-round funding).
Meanwhile, some mobile players have drawn the interest of VC’s close cousin, private-equity companies. Alltel Corp., the fifth-largest wireless operator in the United States, announced in May that it would be acquired by TPG Capital and GS Capital Partners for about $27.5 billion-private equity’s biggest deal to date in the wireless space.
On the other side, one of the most ambitious VC-backed mobile entities, Amp’d Mobile, ran into trouble and declared bankruptcy recently-but VC interest in the MVNO space has been waning for some time.
