Requiem in Pace: Network Venture Investment
May 7, 2009
I went through the updated Moneytree figures to rebuild some charts for the presentation I’m doing (tomorrow — it’s never too late!) at TMW in Nice.
Yurgh. Venture investment in network hardware and software is on an asymptotic curve approaching zero. Maybe ‘getting ready for the post-voice environment’ really means ‘getting ready to get gobbled up by Google.’ The Tier I traditional telephony providers are going to have a very hard time sourcing the kind of technology they need to get ahead of the innovation curve over the next five years.
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May 18, 2009 at 1:32 pm
That Himalaya scale peak in the late 90′s really puts it all in perspective. It would be interesting to see what the plot of the “delta” between total Venture and Network technology looks like.
It appears at first glance to really support the idea that Network Technology is approaching a commodity status.
May 19, 2009 at 2:04 pm
PwC “First Quarter 2009 MoneyTree Report” shows venture investment down to $3B (in the US), as compared to $12.6B in Q1’01, and after clawing it’s way back from the ~$4.3B/qtr low in 2002/3 to $8.1B in late 2007.
Investment dollars are down compared to Q1’08 by 56% for S/W (-45% on # deals), 59% for networking & equipment (-45% # deals), 61% for IT (-35% # deals), 71% for computers & peripherals (-41% # deals), and 75% for telecomm (-52% # deals). So, in addition to the deal count being down 45%, the average values suggest the deals are being starved. In telecomm, $ are down 75% and deal count is down 52%, suggesting “half the number of deals, each at half the value”.
Another interesting statistic shows how that deal reduction is impacting relative to maturity of the venture: Startup dollars are down 53%, Early stage are down 52%, Expansion stage are down 75%, and late stage are down 52%, following a trend that was evident in late 2008.
May 19, 2009 at 3:16 pm
There is a commoditization, but there’s also an innovation gap opening up. You can’t roll out new generations of infrastructure (LTE, IMS) without innovation in operations support (auditing configuration, updating software parameters, enforcing policy, correlating configuration changes with performance data, etc.). Operations Support innovation never comes from the incumbents, and very few early stage companies have been able to survive the funding crisis. It creates a great opportunity for a handful of exceptions.