NETWORK WORLD NEWSLETTER: CAROLYN DUFFY MARSAN'S ISP NEWS REPORT
08/16/04
Today's focus:  MoneyTree survey: VC deals in Internet 
communications continue decline

Dear [EMAIL PROTECTED],

In this issue:

* VC investment in ISP and 'Net comms start-ups at lowest level 
��since 1997
* Links related to ISP News Report
* Featured reader resource
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Today's focus:  MoneyTree survey: VC deals in Internet 
communications continue decline

By Carolyn Duffy Marsan

Venture capital investments in fledgling ISPs and other Internet 
communications start-ups have dropped to their lowest levels in 
seven years, and industry experts predict little or no up tick 
in this market for the rest of 2004.

Altogether, U.S. venture firms invested a scant $91.6 million in 
16 Internet communications start-ups during the second quarter 
of 2004. This investment level is the lowest since the third 
quarter of 1997, when $61.3 million was invested in this segment 
of the network industry. The 16 deals that closed this spring is 
the fewest number since the second quarter of 1997, when 15 
deals closed.

This data is from the quarterly MoneyTree Survey, which is 
compiled by PricewaterhouseCoopers, Thomson Venture Economics 
and the National Venture Capital Association.

The current investment levels are a pittance compared to those 
made at the height of the Internet bubble. In the second quarter 
of 2000, venture firms invested $2.96 billion in 131 start-ups 
in the Internet communications segment.

Venture capital interest in this segment has been flagging since 
then, but it has dropped off sharply in 2004. During all four 
quarters of last year, investment in Internet communications 
start-ups ranged from double to triple the current levels. For 
example, in the second quarter of 2003, venture firms invested 
$297.5 million in 23 start-ups offering new Internet 
communications products or services.

"VCs are being more precise about their investing," explains 
Kirk Walden, national director of venture capital research at 
PricewaterhouseCoopers. "The companies that get funding have a 
very specific advantage, a very specific segment they serve, a 
very specific solution. There's not much opportunity to be that 
precise in Internet communications. This segment is just not 
that attractive."

Walden says another reason for the venture capital industry's 
lack of interest in Internet communications start-ups is that 
none of the public companies are doing well. "I don't see 
[Internet communications] improving markedly anytime soon," he 
adds.

RELATED EDITORIAL LINKS

Venture funding chases tried and true
Network World, 08/09/04
http://www.nwfusion.com/news/2004/080904vcsurvey.html

Venture funding climbs, refocuses on start-ups
Network World Fusion, 07/27/04
http://www.nwfusion.com/news/2004/0727venture.html

Level 3 snares major IP VPN deal
Network World, 08/16/04
http://www.nwfusion.com/news/2004/081604level3.html
_______________________________________________________________
To contact: Carolyn Duffy Marsan

Carolyn Duffy Marsan is a senior editor with Network World and 
covers emerging Internet technologies and standards. Reach her 
at <mailto:[EMAIL PROTECTED]> 
_______________________________________________________________
This newsletter is sponsored by Oracle 
An Economist Intelligence Unit White Paper: From Grid to Great? 

Grid computing is breaking out. Familiar mostly to academics, 
government groups, and scientific researchers, this technology 
that links together the power of diverse computers to create 
powerful, fast and flexible systems is beginning to catch on in 
the corporate world.   Included in this white paper, results and 
interviews from a global survey among Sr Executives, click to 
download now  
http://www.fattail.com/redir/redirect.asp?CID=72604
_______________________________________________________________
ARCHIVE LINKS

Archive of the ISP News Report newsletter (formerly Internet 
Services):
http://www.nwfusion.com/newsletters/isp/index.html
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Solutions for Application Performance Management - Webcast 

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