Network companies struggled to obtain venture funding throughout 2009, and finished the year out with another dismal quarter, according to data released this week. For all of 2009, investors gave $5.1 billion to network companies, down from $9.4 billion the previous year and the lowest total since 1996. The total number of companies receiving funding last year was 1,003, the lowest since 1995. "We're down about half from where we were a year ago," says Tracy Lefteroff, a global managing partner of Pricewaterhouse Coopers, which produces the quarterly MoneyTree Report. "There are just no buyers for goods and services that are encouraging venture capitalists to put money in this space." http://www.networkworld.com/news/2009/121409-outlook-tech-mergers-acquis... ">Tech mergers and acquisitions to grow in 2010 If there's one positive stemming from the venture funding declines, it's that companies that do receive funding are likely to have a strong chance at long-term success. "The deals that are getting funded are high quality because the bar is so high in this space right now," Lefteroff says. In Q4 2009, venture funding for network vendors was $1.4 billion, down from $1.9 billion in the previous year's quarter. The youngest network vendors are having the most trouble securing funding, as start-up and seed companies only received $38 million in Q4 2009, less than half the total in the third quarter.
Notable deals that might interest IT professionals include $35 million for Aquantia, a maker of 10GBASE-T Ethernet products; $35 million for Palantir, a maker of data analysis software; $22.3 million for Widevine, a provider of encryption and key management systems; and $21 million for SandForce, a flash memory vendor. The biggest network deal of the fourth quarter went to Cheg, a textbook rental e-commerce site in Silicon Valley that received $57 million from venture firms. In the MoneyTree Report, network companies include makers of 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. It's a five-year timeline that were dealing with, I think." Follow Jon Brodkin on Twitter: www.twitter.com/jbrodkin On the whole, investors have been wary of network companies for well over a year and there is little indication that trend might turn around in 2010, Lefteroff says. "I think it's going to be a long, painful recovery," Lefteroff says. "I don't see anything that would suggest that in the next year we're going to see a recovery.