Bruised venture capital's new tech focus: efficiency 4/29/01 1:06 PM ET
By Jim Christie SAN FRANCISCO, April 29 (Reuters) - Early-stage venture investors are shifting funds from investments aimed at online commerce to start-ups developing technology promising to make businesses more efficient, a recent report said. The report by the Boston-based Aberdeen Group research firm, said start-ups developing technology for communications infrastructure linked to efficiency gains, especially stand to benefit in the chilly venture funding climate. Earlier this week, for instance, Fidelity Management Research Co., the investment management division of Fidelity Investments, led a $66.7 million for Atheros Communications. Atheros is a Sunnyvale, Calif.-based developer of "radio-on-a-chip" technology for connecting communications, video and audio devices and PCs in any setting. Lower funding levels -- up to $15 million -- are more common for start-ups focused on efficiency-enchancing technology. On Wednesday the Ford Motor Co. (F.N) said it recently invested an undisclosed amount in London, Ontario-based Executive Manufacturing Technologies Inc. The investment follows Ford's purchase of the company's software for tracking plant floor production in real-time over a Web browser to find output constraints and bottlenecks. According to the Aberdeen Group, much of this year's venture action will, like Ford's investment, focus on technologies allowing more information to flow faster. "Investors still believe there are sizable investment opportunities in technologies that improve enterprise operations efficiencies," said David Wright, the report's co-author and the Aberdeen Group's vice president of private equity services. VELOCITY AND VOLUME Among the technology segments to watch in 2001 are telecom resource management, managed services, collaborative product commerce and wireless infrastructure, Wright said. According to Wright, even optical network component makers, who aim to boost transmission speeds and capacity over fiber-optic lines, will attract investment this year despite a slump in the telecom sector. Optical component makers last year commanded funding rounds in the tens of millions of dollars. Today, financing rounds around $5 million are normal. For instance, on Wednesday Pasadena, Calif.-based Tunable Photonics Corp. announced its first financing round, worth $7 million to help it develop "tunable lasers" that, the company claims, are 100 times faster than competing components. With gains of such a magnitude possible, investors likely will continue to open their wallets, albeit cautiously, for component makers, analysts said. Earlier this month, Japan-based Chugai Mining Co. Ltd. put $10 million into Milpitas, Calif.-based Katsina Optics, a start-up with a far different core business. Chugai Mining recycles precious metals. In contrast, Katsina Optics designs and develops testing measurement systems for fiber optic and telecom companies.
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