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Past lessons are key to seeing danger.
13.2 BWA: INDUSTRY MATURES
In the past 3 years BWA has received more than $1.6 billion in VC investment worldwide. In the first quarter of 2003 alone, 22 BWA companies received $70 million. Although this is the area where venture capitalists see huge potential, there is a growing consensus in the VC industry that there is a great deal of disparity and randomness in BWA sector funding; for example, Wi-Fi was overfunded while some sectors like WiMAX were underfunded.
VC targets in this space have been semiconductor developers, providers of platforms for managing access, system technology developers and network operations companies. In the past two years, BWA investors have shifted their focus from semiconductor companies to systems and operations companies. Network operations companies, including roaming billing, administration, efficiency and security, have received 34 % of total VC funding compared with 31 % for chipset companies.
13.3 WiMAX: BUBBLE OR LIFETIME OPPORTUNITY
The evolving world of WiMAX gained a new aura of respectability when silicon kingmaker Intel threw its weight behind the prestandard broadband wireless technology in 2003 and its investor arm, Intel Capital, pledged $150 million to help nurse the fledgling sector, which was started last year. However, despite Intel’s considerable influence, investors and venture capitalists are largely reluctant to follow in Intel’s big footprints and invest in WiMAX, according to analysts.
The current level of investor interest in WiMAX is fairly high but there is some trepidation among the pure VCs because of the bad associations with previous broadband wireless failures like Teligent. Part of investors’ hesitancy stems from the sheer complexity of the business - the need for spectrum and standards and the competing wireless broadband technologies such as EV-DO, HSDPA and Wi-Fi.
STRATEGY FOR SUCCESS: USERS AND INVESTORS
However, the eye-rolling may also be partly a function of the inherent impatience of the VC mind, stimulated by Intel’s cheerleading and frustrated by the reality that mobile WiMAX is not expected until 2008.
There are two schools of thoughts, or two camps of VCs: one camp simply disagrees that WiMAX is as promising as Intel claims. The other not only sees the value of WiMAX but also believes the opportunity it brings really belongs to large companies rather than start-ups, essentially leaving VCs out of the game.
Not all VCs feel that way, evidently. Those open to WiMAX seem particularly interested in WiMAX chips, applications and roaming software. California chip start-up TeleCIS roughly doubled its total funding in December with a $4 million B round from ATA Ventures. Canadian chip vendor Wavesat closed an oversubscribed $10.5 million round of VC funding last fall, including $2.5 million from a pension fund, and in February, French chip start-up Sequans Communications announced an oversubscribed $9 million B round from European sources.
The immense economic and social potential inherent in WiMAX notwithstanding, the industry overall still faces significant challenges:
• business models for emerging wireless companies are unclear;
• immature industry standards result in solutions that are not quite ready for the mass market - WiMAX mobile is still in the standards development stage;
• most of the expectation built by vendors is on promises, not reality.
Investor confidence and overall perception of WiMAX have suffered recently due to the delay of about 6 months in the 802.16-2004 certification process. Like an overexcited child, the technology industry is never able to stop itself wishing away the days until Christmas. Time and again, standards and products fail to meet their schedules, not because of any intrinsic problem, but because the deadlines were unrealistic to start with.
The delay is a blow that is more symbolic than real. However, the delay will prompt scepticism about the program, and this will be far more serious if it has a knock-on effect on the upcoming mobile standard, 802.16e. It is essential that, from now on, the WiMAX
Forum sets realistic deadlines and does not risk further backlash against its technologies.
Another important thing to look out for is that such roadblocks, however, small, can enhance investors’ hesitancy, part of which stems from previous broadband wireless failures like Teligent, and the rest from the sheer complexity of the WiMAX business.
These are legitimate, immediate concerns for the wireless industry as a whole; resolving them does not put the region at a specific competitive disadvantage within the industry. However, enthusiasm for the industry must be tempered by a consideration of these challenges.
On the other hand, their existence, while daunting, may also point to new business opportunities, for example, in standards integration and the development of business strategies. It is like being in the Wild West, unsettled but filled with opportunities for those who persevere.