Communications Wrap 2: Big Deals Keep Coming

Despite the summer volume doldrums, venture capitalists continued to devote wads of cash to the communications sector during the final full week of August. From August 21 through August 25, a pair of companies received a whopping total of $162 million, led by a $150 million expansion-stage financing for Fremont, Calif.-based optical switching technologies developer Cyras Systems Inc.

“The optical switching technology space is red hot, if not white hot,” said Adam Goldman, general partner at Centennial Ventures, a Denver-based firm that targets communications, Internet and software companies. “Valuations there are just astronomical. [There is] no better time to be raising money if you?ve got an optical switching company.”

Cyras Systems? venture backers include Draper Fisher Jurvetson, El Dorado Ventures, Menlo Ventures, New Enterprise Associates, Rader Reinfrank & Co., Viventures and Worldview Technology Partners. Founded in January 1998, the company initially received $8.8 million in October 1998, followed by $31.5 million in August 1999 and $50.1 million in December 1999.

Centennial Ventures portfolio company, Ellacoya Networks, a Merrimack, N.H.-based developer of optical service provisioning platforms, is currently meeting with investors to raise a second round of financing, Goldman said. He expects the company to get funded within 30 to 45 days. Centennial Ventures backed the company during its initial $34 million round in May, along with Weiss, Peck & Greer, Bessemer Venture Partners and Lighthouse Capital Partners.

Valuations of private deals in other areas of the communications sector have decreased significantly, approximately 20% to 50%, Goldman said. And because the deals are so capital intensive, people are taking second and third look when it comes to funding them, especially because the public market is so tight, he said.

Over the past four weeks, four California-based communications companies received $216.5 million, higher than the totals from any other state, according to our VentureXpert database. Massachusetts came in second, with four communications companies garnering $142.7 million followed by one company in New York, with $70 million.

Between June 31 and August 27, 35 communications companies received a total of $731.7 million in venture funding.