VCs Hope to See Wi-Fi Everywhere

Many people are familiar with the coffee shop’s Wi-Fi, while others even know how to set up a simple home network. Pretty much everyone, however, knows that Wi-Fi is what makes it all possible. That ubiquity is what many venture firms are counting on as they invest in a group of startups putting Wi-Fi into cameras, televisions and even keyboards and mice.

The number of Wi-Fi chips sold is expected to top 1 billion this year, up from more than 200 million sold in 2006, according to data from ABI Research. Beyond computers, WiFi-enabled televisions, set-top boxes and cars are entering the market. That’s good news for those backing the standard, but it could pose a problem for the multiple startups betting on different wireless standards for connecting computers to peripherals, transmitting wireless video and managing home-automation networks.

Carl Showalter, founding general partner with Opus Capital, says the current and next-generation versions of Wi-Fi have the bandwidth to offer video and can do a variety of things at lower power; energy use and wireless bandwidth have been the most common stumbling blocks to using the technology in more applications. For Opus, Wi-Fi’s primacy in the market has translated into investments in Eye-Fi, which announced an $11 million Series B round this month for a card that WiFi-enables a digital camera, and in GainSpan, which raised $20 million at the end of 2007 for its ultra-low-powered Wi-Fi chipset, which could be used in sensor networks and home automation.

So where in the home might Wi-Fi work? First, it’s good to recall that Wi-Fi currently allows us to transmit a lot of data, really quickly, over distances of about 120 feet. In each generation of the technology standard, the amount of data that can be transmitted has expanded, essentially enabling the networks to carry more information, faster. Some companies are now working on ways to use the proposed 802.11n next-generation Wi-Fi standard, set by the IEEE, to transfer high-definition video to televisions.

Wi-Fi started out in the home office, linking computers to broadband connections, then to each other without cables. It could soon replace technologies such as Bluetooth or proprietary lasers in wireless keyboards and mice, thanks to a new project at Intel called Cliffside. Researchers on the project are developing technology to add short-range transmission to Wi-Fi’s capabilities. In June, Ozmo Devices came out of stealth mode with $12.5 million in funding from Intel Capital, Tallwood Venture Capital and Granite Ventures with plans to use Cliffside technology in developing a line of WiFi-enabled keyboards and mice. Products should be available later this year.

The office conquered, Wi-Fi is now making a beeline for the living room with attempts to deliver high-definition video to the television from set-top boxes, PCs or DVD players. Samsung and Philips already offer Wi-Fi chips in televisions for standard-definition content. In late July, Cisco (which has a pretty hefty stake in Wi-Fi with its Linksys-brand routers) led a $16 million round for Celeno Communications, a startup trying to make WiFi-based home entertainment networks a reality. It’s worth noting that several other technical standards are trying to win out when it comes to replacing the wires associated with televisions and their accoutrements. Those include Ultra-wideband, Wireless HD and the newly formed WHDI Special Interest Group.

Eric Zimits, a managing director with Granite Ventures, says the market for cable replacement between the TV and DVD player might end up using a specialized standard developed by the consumer electronics device makers, but he also says Wi-Fi provides more value by allowing content to move between more devices around the home. Standards such as Ultra-wideband and Wireless HD only travel distances of a few feet, making it impossible to use them to send a movie playing on the DVD player to a TV elsewhere in the home. In contrast, standards such as Wi-Fi or WHDI would make it possible to have just one set-top box that could wirelessly transmit content to all home screens.

The final potential home networking coup for Wi-Fi would be in the home-automation market, where emerging standards such as Zigbee and Z-wave are trying to succeed. As Wi-Fi sheds its power-sucking problems, it could also wirelessly control battery-powered thermostats, surveillance cameras and other sensors. As your home fills up with gadgets running on the Wi-Fi network, venture firms will need to look for startups that can set bandwidth priorities among devices so that your television signal doesn’t break up when your thermostat kicks on.

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