Results from the '99 PricewaterhouseCoopers Survey show a Continued Increase in Venture Capital Investment in Communications

Business Wire, May 23, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--May 23, 2000

Venture capitalists invest $190 million a day

into emerging companies in Q1

According to PricewaterhouseCoopers Money Tree Survey, venture capital investments in the United States reached $35.5 billion in 1999, an increase of 148 percent over the investment level for all of 1998. The communications industry has increased by 239 percent, from $3.3 Billion in 1998 to 11.2 Billion one of the largest increases in any industry sector.

For the first quarter of 2000, venture capitalists invested over $17.2 billion in emerging companies - over 90% of which were technology-related.

According Martin Kehoe, leader of PricewaterhouseCoopers Fast-Growth InfoComm Group, "Venture capital spending in 1999 is nearly 150 percent over 1998. The rise in venture capital investment over the last year that simply dwarfs the pace of increased investment that we've seen in the previous four."

For the first quarter of 2000, the number of companies receiving funds increased 94% to 1,423 compared to 732 companies a year earlier. At the same time, average funding per company increased 105% to $12.10 million versus $5.89 million a year ago.

"Quarter-to-quarter, the rate of growth is slowing, but that's not surprising considering that 1999 jumped 150% over 1998. The fact that the raw dollars continue to increase may indicate that a new plateau has been established," Kehoe observed.

PricewaterhouseCoopers Money Tree Survey tracks quarterly investments in U.S. companies by venture capitalists nationwide in all types of industries. The focus is on the total amount of funds received by companies in return for equity, usually preferred stock.

Other Communications Related Findings:

-- Bigger Deals. In 1999 the number of communication deals

between venture capital firms and communications businesses is

up by 76 percent, the average size of deal is up 92 percent

over 1998. Communications investments in Q1 2000 exceeded $5

billion - nearly five times greater than the same period in

1999. The total number of deals in the communications industry

was up 76% from Q1 1999 - 880 deals as compared to 500 deals.

-- Communication Breakdown. Of the 11.8 billion invested in

communications companies in 1999, 42 percent equipment

suppliers, 32 percent went to Internet businesses (content

companies, ISPs, e-commerce services) and 10 percent went to

telecommunications service providers (CLECs, DSLs, carriers,

wireless providers, satellite services and fiber nets).

-- Telecom Equipment. Equipment manufacturers received $3.8

billion in VC funding during the year. This represents an

increase of 150 percent over the amount of investments for all

of 1998. Of the $3.8 billion in VC investments, 18 percent

went to wireline network suppliers, 33 percent to optical

fiber network suppliers and 46 percent went to wireless

network equipment.

-- Internet Investments. Internet service providers received $3.6

billion in VC funding for 1999. Of the VC dollars flowing to

Internet service providers, 66 percent went to e-commerce

providers and businesses offering technical support for Web

site operations. Internet service providers received 15

percent of 1999 investments and other types of companies

providing important technical services to Internet users

received 18 percent of the 1999 investments, which includes

Web design companies, E-commerce solutions and companies

developing streaming media. For Q1 2000 Internet-related

companies received over $1 billion in venture funding.

-- Telecom Service Providers. Venture capital funds flowing to

telecommunications service providers hit $2.6 billion in 1999.

This level of funding is 172 percent increase from 1998. Of

the $2.6 billion going to telecom service providers, 49

percent went to CLECs and DSLs, 17 percent went to wireless

service providers, 16 percent went to resellers (in-building

service providers, prepaid retailers), and 7 percent went to

international carriers and satellite service providers.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's leading professional services organization. Drawing on the knowledge and skills of 155,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance. PricewaterhouseCoopers refers to the US firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization.