http://www.networkworld.com/news/2005/050405-moneytree.html By Cara Garretson Network World Fusion 05/04/05 Most networking start-ups that received venture capital during the first quarter of 2005 focus on tried-and-true technology, underlining investors' continued apprehension to place risky bets on companies in this sector. According to a special slice done for Network World of the MoneyTree Survey by PricewaterhouseCoopers (PwC), Thomson Venture Economics and the National Venture Capital Association, 335 companies in networking and related sectors received funding during the first quarter, totaling $2 billion. That's down slightly from 2004's fourth-quarter level of 353 companies totaling $2.1 billion. For purposes of this report, the networking industry is defined as companies in telecommunications, networking, software, computer and peripherals. The networking segment "has got a pretty steady-course track record over the last couple years that suggests sustained investments," says Tracy Lefteroff, global managing partner of PwC's venture capital and private equity practice. "The sector is not going away, and is poised to pick up." Areas where investors put their money in the first quarter echoed the trends of the last few years, says Lefteroff. Those areas include just about anything related to security, as well as wireless communications, e-commerce systems and network management and infrastructure. The first quarter's largest deal was a $108 million investment in anti-spyware maker WebRoot, led by Technology Crossover Ventures, Accel Partners and Mayfield, providing evidence that the security sector continues to be a main attraction for investors. Other top investments of the quarter include $32 million in CEH Holdings, an early-stage maker of Internet commerce services, and $30 million in CSM Wireless, an outsourcer of wireless data translation. Despite this continuation of investment trends during the first quarter, some venture capitalists say there are interesting new areas within the networking market that will be worth exploring this year. The convergence of wireless and VoIP networks, as well as the meshing of entertainment and media, will drive the need for innovative start-ups that can produce technology to support these trends, says Lefteroff. While the MoneyTree Survey reports that investments in networking companies remained flat over the past few years, another venture capital report issued last week detailed an up tick in deals involving communications companies. The Quarterly Venture Capital Report by VentureOne and Ernst & Young late last month, tracked 68 investments in communications companies during the first quarter of 2005, a level that hasn't been reached in over two years. This discrepancy among reports is likely caused by differing definitions of the communications sector. _________________________________________ InfoSec News v2.0 - Coming Soon! http://www.infosecnews.org
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