While investors seemed to lose more and more interest in New Economy companies with every passing month of 2000, venture capital outlays to the communications sector nearly doubled 1999 figures.
According to preliminary figures from our VentureXpert database, 1109 communications companies raised $3.104 billion from private equity investors. In 1999, those same investors only parted with $1.726 billion for 765 different communications companies.
Last year?s investors also proved willing to take larger stakes of communications upstarts than they had in the past. In 2000, a private communications firm raised an average of $27.99 million with a typical round pulling in $22.78. In 1999, the same types of companies raised an average of $22.56 million with average rounds coming in at $17.14 million.
As for what is behind such marked increases, one obvious answer is that the venture capital fund-raising activity accelerated beyond all expectations last year. As such, there was simply more money to go around.
Credit should also be given to a soaring public market during the first half of 2000 in which retail investors consistently greeted the latest communications IPO with welcome arms.
For example, Englewood, Colo.-based DSL provider Rythyms NetConnections raised $250 million from buyouts firm Hicks, Muse, Tate & Furst Inc. in February, while Interliant Inc., a network-based provider of Web-hosting services, raised $187.5 million from Microsoft Inc. and Softbank Venture Capital in March.
While such public exits mostly occurred before the public markets went south, the bear market did not really sour venture capitalists on the communications sector. For example, Carolina Broadband completed the largest deal of the year in May ? a full month after it had become clear that there was still such a thing as an economic cycle. The Charlotte, N.C.-based company, which bundles broadband multimedia services, raised $402 million in a financing round in May which included Navis Partners, Wachovia Capital, Chase Capital Partners and Providence Equity Partners Inc.
According to the National Venture Capital Association ? and for the purposes of this article — communications is a broadly defined sector, ranging from radio and TV broadcasting, telephone and wireless services, data communications and Internet infrastructure.
Carolina Braunschweig can be contacted at Story Feedback.