Communications Wrap: VCs Dial Down Q1 Disbursements

At any given moment, your average venture capitalist is likely carrying a cell phone, two way-pager or BlackBerry handheld, if not all three. Instant access and 24/7 availability are the watchwords of the VC universe and, given this all-consuming fetish for staying in touch, it?s no surprise that many investors are searching for the big thing in communications. According to Q1 2001 disbursement figures, however, it seems the search has slowed.

According to our VentureXpert database, VCs invested $3.61 billion into 239 communications companies during the first quarter of this year. While this is by no means a throw-away amount, it still represent a 50% decline from last year?s first quarter, when VCs pumped $7.18 billion into 379 companies. On average, communications companies left the negotiating table with $15.12 million in venture funding during Q1, which was more than $3 million dollars less than Q1 2000?s $18.95 million average commitment size.

A quick look at the top communications deals closed in Q1 illustrate the sector?s slide. Sanrise Inc., a managed storage solutions provider whose venture backers include Crosspoint Venture Partners, Texas Pacific Group and Comdisco Ventures, took top honors, closing a $148 million round in February. In contrast, last year?s top fund-raiser for the quarter, Integra Telecom Inc., took home $211 million in venture financing.

Telseon, a provider of Internet infrastructure services whose investors include Crosspoint Venture Partners, Enron Broadband Ventures and Goldman, Sachs & Co., took the number two position for the quarter with a $100 million round that also closed in February. In comparison, Interliant Inc., the number two company for Q1 2000, raised $177.50 million from its venture backers.

February proved to be the most lucrative month during Q1 to close a round as 69 companies split $1.29 billion in venture funding for a per company average of $18.74 million. January took the number two spot in terms of average deal size with $1.13 billion going to 76 companies for a per company average of $14.99 million. March rounds out the list, with 94 companies splitting $1.18 billion for a per company average of $12.55 million.

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