VCs see hope in telecom

Santa Ana Pueblo, NM--Despite what one described as a “telecom nuclear winter,” venture capitalists at the Integrated Broadband Networks Summit in New Mexico say they have piles of cash to invest in the telecom market.

The vast majority of that is looking for a home in the access market, according to Michael Golden, entrepreneur-in-residence at Neveric Merchant Bank. Golden is particularly bullish on the unlicensed wireless market because of what it can do for the economics of access.

“One of the fundamental problems is capex per subscriber,” said Golden.

Cable operators, for instance, generally report that upgrading to hybrid fiber coax costs at least $1000 per subscriber. In the 802.11 arena, carriers willing to play with the new technology are finding that cost dropping to about $50 per subscriber.

Moreover, vendors are facing a significantly different timeframe for funding. Just a few years ago, start-ups could expect a relatively quick exit in the form of an acquisition or IPO, regardless of profitability. In the current environment, VCs are pushing that timetable back.

“Our expectations for exit are more in the realm of 60 months,” said Greg Rossmann, partner at Pequot Ventures.

Still, there’s money to be had.

Pequot just raised $750 million for a intermediate stage fund, while others report solid interest in telecom.

“There’s a barrel full of money in our office [for innovative ideas],” said Rossmann.