Skip the navigation
News

Industry watcher: Network infrastructure market overdue for venture capital infusion

By Bob Brown
September 27, 2012 06:34 PM ET

Network World - Venture capitalists have pumped oodles of money in recent years into startups that exploit telecom networks and wireless infrastructure, but now it might be time for infrastructure startups themselves to start attracting more funding, according to industry watcher Ovum.

Ovum reports that VC funding of telecom infrastructure startups has fallen from $796 million in 2009 to about a third of that over the period of Q3 2011-Q2 2012, while money has poured into mobile, social and over-the-top (of wireless network) startups and overall venture funding has increased as well. Citing data from the recent PWC/NVCA MoneyTree Report, Ovum points out that the networking and equipment share of total VC investments shrank to just 1% for the past four quarters (Q3 2011-Q2 2012), down from about 10% in 2003.

ADVICE: 5 tips for locking in VC funding

STARTUPS: 12 hot cloud computing startups to watch

But Ovum Principal Analyst Matt Walker says carriers and enterprises need to keep bolstering their networks to support all the new software and services, and without an infusion of fresh infrastructure companies, they will become beholden to a dwindling number of powerful players (the Ciscos and Huaweis of the world). Recent IPO activity (Nimble Storage, for example) and M&A transactions in the infrastructure market, including VMware's $1.26 billion buyout of software-defined networking player Nicira, could be indicators that investments in such infrastructure companies can pay off for VCs.

"With a weak start-up pipeline, the [telecom] industry relies more on incumbent vendors to generate new ideas and products. Their budgets are bigger, but VCs are often better at funding 'game changing' ideas ignored by established vendors," Walker says in a statement. "Incumbent vendors' internal R&D budgets are now nearly 90 times larger than VC investments in the sector, up from 30 times two years ago. This narrows options for service providers, who rely on both large and small vendors for innovation. The big vendors also need access to the start-up pipeline, to fill in gaps in their own portfolios through partnership and M&A."

Ovum notes that service providers themselves are getting more active in seeding startups, citing Deutsche Telekom's move earlier this month to revamp its T-Venture unit.

Read more about data center in Network World's Data Center section.

Originally published on www.networkworld.com. Click here to read the original story.
Reprinted with permission from NetworkWorld.com. Story copyright 2012 Network World, Inc. All rights reserved.
Our Commenting Policies
Blog Spotlight
Richi Jennings

Crafty hackers hack craft stores -- again.

Michaels Stores (NYSE:MIK) has finally confirmed the details of the point-of-sale hack revealed in January. It's unclear what's taken them so long -- the company claims the hack was "highly sophisticated," but everyone uses a blah-blah phrase like that.

Your humble blogwatcher notes that the problem persisted for more than a month after the news first broke. smh.

In IT Blogwatch, bloggers are aghast that, for the second time, the company's POS was hacked -- lasting almost nine months.

Robert L. Mitchell
Sharky