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Wireless Funding Weakening

Unstrung's latest roundup of funding for wireless startups provides ammunition for both the bulls and the bears of the investment world (see Funding: Startup Update).

For the bears, the end of 2002 and the initial weeks of 2003 (mid-October to mid-January) showed a weakening market, with the total amount invested in wireless companies down by $104 million to $384 million compared with the previous three months (see Funding: Startup Roundup, which looked at July to October 2002). Not great news.

What may just excite the bulls is some of the more recent activity highlighted in this report. Late January and early February saw some funding announcements that, if they set a trend for the rest of the year, could just be the seeds of a minor recovery (see Starent Raises $23M and Danger Gets $35M, for example).

The two biggest individual deals of the quarter were for two of the sector's chipset players: SiGe Semiconductor Inc., a front-end integrated circuits (ICs) and power amplifiers specialist that raised $43 million; and GCT Semiconductor Inc., a firm focused on the development of direct conversion radio frequency ICs, which bagged $38 million.

So what about the increasingly hot 802.11 sector? With so much emerging competition in the wireless LAN market, are venture capitalists banging on the doors of the startups? Apparently not. Yet.

There is some funding, but it is mostly minor league stuff. The grandest investment in this area ($9.6 million) was for German hotspot hopeful WLAN AG, which is kitting out German hotels with 802.11 gear from Intel Corp. (Nasdaq: INTC) and Symbol Technologies Inc. (NYSE: SBL).

A reasonable chunk of the total funds handed over in this particular quarter went to some of the companies sitting in Unstrung's Top 25 Startups list, including ArrayComm Inc. ($7.9 million), IPWireless Inc. ($27 million), and WaterCove Networks Inc. ($20 million). While the two TDD access companies have been busier than an accounting-firm shredder (just type their names into our search engine!), next-generation service node startup WaterCove has been a bit on the quiet side since it trumpeted its contract with Orange UK (London: OGE).

However, the alerts from Orange are favorable, and this extra funding could take the company on to a deal with an operator not related to one of its backers (WaterCove has Orange Ventures as an investor).

For further details on other these and other deals, check out the report, Funding: Startup Update, now.

— Ray Le Maistre, European Editor, Unstrung

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