The long-term growth potential of the wireless sector continues to be hard to resist for venture capitalists (VCs), despite the considerable short-term difficulties. The proportion of transactions involving fixed telecoms and wireless start-ups continues to be high compared to other sectors of the technology industry.

In recent weeks, VC firms have invested in just 18 European technology companies. Of those, no fewer than eight are in the communications sector. One such beneficiary was End2End (formerly Pre-tel Wireless), a Denmark-based supplier of aggregated wireless applications and content. In July 2002, it secured EU20 million in a third round of funding. Within weeks, the company said it had secured a deal to supply wireless application infrastructure to Sonofon, a Danish mobile operator. End2End already is a supplier to Orange, the France-based mobile phone giant.

AssetHouse, a BT spin-off that secured EU6.3 million from BT, LMS Capital, Quester and Intel, is another company whose technology aggregates content and services from a number of sources and for a variety of distribution channels. Like End2End, the company’s key selling point is its ability to enable service providers to deploy new data services rapidly and comparatively cheaply. Many VCs believe such technologies are timely, given the fact that operators are pressed for cash and yet need to continue investing in new services to stay ahead of the pack.

The burgeoning wireless local area network (WLAN) market is a further source of qualified hope for embattled VCs. Wificom Technologies, a supplier of WLAN infrastructure software, won EU1.5 million in first-round funding from 3i, the UK-based firm, in August 2002. Wificom Technologies was created in July 2002 by the merger of two small European WLAN software vendors: Wificom, a France-based supplier of WLAN provisioning software, and Miscom, a Finnish supplier of broadband platforms.

For these and other start-ups to succeed, of course, the communications industry as a whole will have to find that elusive ‘killer application’. One early favourite is the various forms of interactive, multi-user communication, including instant messaging and teleconferencing, for fixed phones, mobile devices and so-called PC ‘softphones’.

A key underlying technology that seeks to enable simultaneous multi-user communication between different types of devices is known as the session initiation protocol, or SIP. One company heavily involved in SIP work is Hotsip, a Stockholm-based supplier of SIP-based products to network operators and application developers, which secured EU4.5 million in funding from several investors including Ledstiernan and 3i. Sonera, Finland’s dominant phone company, is an early licensee.