VC money not going to enterprise net hardware vendors
 
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Recently, my colleague Bob Brown and I had the opportunity to chat with several venture capitalists who have in the past invested in technology companies. The striking thing about those conversations was that venture capitalists still aren't investing in enterprise network hardware vendors.
This trend has been going on for some time. Since the Gigabit Ethernet/Layer 3 switching start-ups arose in 1996, there hasn't been an enterprise network technology that was so new and different that someone would actually form a new company around it.
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In the past, most of the new technologies were powered by start-ups, which then were snapped up by bigger vendors. Without the start-ups, innovation will slow down. Now any innovation around high-speed LANs will have to come from established equipment vendors such as Cisco.
The other major players today are vendors with strong telecom, rather than enterprise, backgrounds. For example, Nortel, Lucent and Alcatel have all snapped up enterprise network vendors. The problem is because these vendors are focused on telecom, instead of the enterprise, they may put their best efforts into their traditional business.
So where is today's venture capital going? Application service providers are hot, as are start-ups that supply network equipment to carriers.
Send me e-mail at jcaruso@nww.com.
