Venture Investors Develop a Taste for Wireless Startups
By ANDREW SIMONS
Wireless technology companies seem to be picking up where optical gear startups left off a couple of years ago.
In the Southland, wireless startups have been the province of San Diego, with wireless behemoth Qualcomm Inc. dominating the landscape and spurring startup funding.
But in the past few months, two OC-based wireless companies received substantial rounds of funding and there are indications that more could be on the horizon.
Irvine chip designer U-Nav Microelectronics Corp. recently raised $10 million in a second round of venture investment, bringing its total funding to $14 million. Laguna Niguel-based Bitfone Corp., a software developer for wireless phones, recently took in $19 million in a second round.
“We’ve been through the terrible collapse of the dot-com bubble,” said Randy Lunn, general partner with Palomar Ventures Management LLC. “The ripple effect through telecom is still happening. We are however beginning to see new investment in the next generation of telecom technology here.”
U-Nav designs chip-sets for global positioning systems. GPS allows the location of a cell phone or other mobile device to be easily pinpointed using satellites. Chipsets are companion chips that perform a certain function in an electronic device and work along with the main processor chip.
U-Nav’s chips purportedly improve a cell-phone’s reception while sapping a small amount of its battery power. This helps a phone operate better indoors and in downtown areas.
Bitfone, meanwhile, is developing software that allows wireless service providers such as Sprint PCS Group and AT & T; Wireless Services Inc. and phone makers such as Nokia Corp. and Motorola Inc. to update a cell phone’s operating software over wireless networks. The company says its software gives wireless carriers a chance to save money and boost sales by enabling phone upgrades without customers having to bring the devices into a service center.
“The operating cost of supporting the network has made many business models unviable,” said Eric Harrison, managing director at Menlo Park-based General Innovation Partners. “(These startups) are really trying to take the cost out of operating networks.”
Such interest may mark a shift away from venture investments in so-called “infrastructure” technologies,gear that sits inside big computer networks. Such technology became attractive to venture capitalists after they watched Internet companies go bust.
Venture investors saw that there was going to be increasing amounts of data sent over the Internet. And they saw the failure of Internet-based businesses as an indication that there weren’t enough fast pipes to make serious money selling over the Internet. So they started funding companies that make the pipes,or speed the flow of data over them. Startups such as Newport Beach-based Newport Opticom Inc. and Irvine-based OpVista Inc. received multiple rounds of funding.
Now, with optical-related bellwethers such as Nortel Networks Ltd. and Lucent Technologies Inc. in free fall, venture investors say there are too many optical gear companies. A so-called “me-too” effect,that is, too many companies with similar products seeking money,had been created.
But with wireless service providers upgrading to third-generation networks that promise to send data over cell phone connections at fast speeds, venture investors are seeing renewed interest in wireless technology.
“A lot of wireless companies are out raising money again,” said Palomar’s Lunn. “Some may not be successful. The differentiating factors will be customer momentum and quality of management.”
