10 Biggest Network Venture Capital Deals From Q2

Software-as-a-service, flash storage, security and semiconductors dominate the top 10 network venture capital deals in Q2, according to the MoneyTree Report.

Venture capital investments in network companies rebounded slightly in the second quarter, three months after funding levels reached an historic low, but venture experts said the industry is far from making a true comeback.

U.S. venture capitalists invested $1.2 billion in networking companies in the second quarter of 2009, up from $982 million in the first quarter, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA).

Workday, a software-as-a-service ERP vendor, led the way with $75 million in new funding, while the rest of the top 10 featured technologies such as flash storage, security, routing and switching, semiconductors and data warehousing. (The full top 10 list is at the end of this article.)

Q1 2009 was the first quarter since 1996 in which investments for network companies fell below $1 billion. But the increase to $1.2 billion is not statistically significant and does not indicate a return to form, says Tracy Lefteroff, a global managing partner of Pricewaterhouse Coopers.

"It's just flat," he says. "I wish I could tell you there was light at the end of the tunnel."

Despite the increase in money, there were actually fewer deals in the most recent data, with 224 second-quarter deals compared with 230 in the first quarter.

The market for IPOs and mergers and acquisitions has largely dried up, and as a result investors are wary of funding new companies. EMC recently agreed to purchase Data Domain for $2.1 billion, but Lefteroff says that was more of an isolated event and that he doesn't expect a major reversal of fortune in the network industry for at least another year.

Network venture funding is on pace to reach $4 billion in calendar year 2009. When asked what level of funding would be considered healthy, Lefteroff looked back to 1997, when network companies received $6.9 billion in what he called the last normal year before the dot-com bubble.

"You'd have to get above that $7 billion to say 'we're on our way back up,'" he says.

Some companies are raking in the cash, however. Here is a list of the top 10 network venture capital deals in the second quarter. Network companies include computer software, hardware, peripherals and services; data, Internet, satellite and wireless communications; Internet software, e-commerce, digital imaging, computer graphics and other network-related technologies.

1. Workday, Pleasanton, Calif.Description: Software-as-a-service platform offering enterprise resource planning tools.Funding: $75 millionInvestors: Greylock Partners, New Enterprise Associates

2. Fusion-io, Salt Lake City, Utah.Description: Storage company that sells PCIe cards that are loaded with flash memory and inserted directly into servers.Funding: $47.5 millionInvestors: Dell Ventures, Lightspeed Venture Partners, New Enterprise Associates, Sumitomo Corporation, undisclosed firm.

3. LifeLock, Tempe, Ariz.Description: Security vendor that helps consumers navigate the tricky process of avoiding identity theft.Funding: $40.1 millionInvestors: Kleiner Perkins Caufield & Byers

4. Palo Alto Networks, Sunnyvale, Calif.Description: Security vendor whose firewall helps enterprises see and control applications, users and content.Funding: $36.6 millionInvestors: Globespan Capital Partners, Greylock Partners

5. Force10 Networks, San Jose, Calif.Description: Develops network routing and switching equipment.Funding: $30 millionInvestors: Advanced Equities Capital Partners LLC, Crosslink Capita, DCM, Meritech Capital Partners, Morgenthaler Ventures, New Enterprise Associates, U.S. Venture Partners, undisclosed firm.

6.(tie) Unity Semiconductor Corporation, Sunnyvale, Calif.Description: Develops non-volatile memory products designed to offer higher density and faster write speed than NAND flash.Funding: $22 millionInvestors: August Capital Management, Lightspeed Venture Partners, Morgenthaler Ventures, undisclosed firm.

6.(tie) ParAccel, Cupertino, Calif.Description: Incorporates a massively parallel processing and columnar design into data warehousing, analytics, and business intelligence products.Funding: $22 millionInvestors: Bay Partners, Menlo Ventures, Mohr Davidow Ventures, Walden International, undisclosed firm.

8.(tie) Wispry, Irvine, Calif.Description: Designs programmable radio frequency semiconductor products for the wireless industry.Funding: $20 millionInvestors: American River Ventures, Blueprint Ventures LLC, Chart Venture Partners, In-Q-Tel, L Capital Partners, Paladin Capital Management LLC, Shepherd Ventures, Tech Coast Angels, Inc., two undisclosed firms.

8.(tie) Beceem Communications, Santa Clara, Calif.Description: Producer of mobile WiMAX semiconductorsFunding: $20 millionInvestors: Global Catalyst Partners, Intel Capital, KTB Ventures, Khosla Ventures, Mitsui & Co. Venture Partners, NEC Corporation, Samsung Venture Investment Corporation, Walden Inernational, undisclosed firm.

10. Tendril Networks, Boulder, Colo.Description: Provides services to connect wireless sensors and networks.Funding: $19.2 millionInvestors: Appian Ventures, Good Energies, Inc., RRE Ventures LLC, VantagePoint Venture Partners, Vista Ventures.

This story, "10 Biggest Network Venture Capital Deals From Q2" was originally published by Network World.

Copyright © 2009 IDG Communications, Inc.

Discover what your peers are reading. Sign up for our FREE email newsletters today!