Networking VC funding set for positive rebound

Analyst house Ovum has indicated that after a few years in the doldrums the interest from venture capitalists in traditional networking firms is on the rise

Networking and telco start-ups looking for venture capital backing should find life becoming slightly easier with other forms of funding becoming available in the market.

Since the recession started to bite the VC money that has come into the tech market has largely been given to firms specialising in mobile and social operations with support for traditional network infrastructure businesses declining.

But according to Ovum that situation should change for a couple of reasons, the first being the emergence of service providers as a source of capital for start-ups.

But in addition to those funds emerging the analyst house is predicting a rebound in the VC market back towards network infrastructure with consolidation in the market having made it clearer what opportunities are worth putting money into.

Matt Walker, Ovum Principal Analyst, said that the venture capital market had recovery from the recession and was putting money into ventures including the likes of Facenook and Twitter but network infrastructure spending had dropped.

“A funding disconnect has thereby emerged between network builders and network users. Lots of innovation and venture capital is targeting the network users, such as mobile apps and OTT platforms. However, little of it is directly helping the network builders," he said.

"With a weak start-up pipeline, the industry relies more on incumbent vendors to generate new ideas and products. Their budgets are bigger, but VCs are often better at funding ‘game changing’ ideas ignored by established vendors," he added.

But while VC's have turned their backs on networking infrastructure the vendors haven't with R&D budgets nearly 90 times larger than venture capital investments in the sector, an increase of a third on just two year ago.

"With the recent VC drought in networking, it’s not surprising that big telcos have become more directly involved in funding start-ups,” added Walker.

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