New York-based telecom provider Broadview Networks has managed to snag $40 million in a Series F round of financing. The move will support its acquisition of Networks Plus, a Randolph, Mass.-based competitive local exchange carrier (CLEC) that was in bankrupt at the time of the sale.
Broadview’s acquisition of Networks Plus marks its fourth in less than eight months.
It seems that there are only a handful of CLECs left. “Most of the companies did not survive the shake-out and consolidation process in the CLEC” says Barry Eggers, general partner with Lightspeed Venture Partners and an investor in Broadview Networks. Eggers believes that CLECs’ problems stem from the industry putting a lot of capital into their networks before securing a customer base. They anticipated overwhelming demand, which was never realized, says Eggers. To side-step that problem, Broadview’s approach concentrates on acquiring customers first, which allows the company to generate revenue from day one and achieve cash flow break even relatively soon.
Broadview bought more than 200,000 local lines, thousands of long-distance accounts and about 370 employees for $15.75 million from Networks Plus.
Broadview will also gain long-haul fiber network that runs from New Hampshire to Florida, along with significant metropolitan fiber networks.
Prior to this acquisition, Broadview bought the digital subscriber line business of IDT, some commercial customers of RCN, and assets of Net2000 Communications.
Broadview claims that with the acquisition of Networks Plus it is the leading CLEC, barring long-distance providers in Verizon’s market area – the largest local market in the country. Broadview strives to be cash flow positive by year end.
Other than Lighspeed’s investment, this round attracted capital from Baker Capital, ComVentures, New Enterprise Associates and TIAA-CREF. Each party co-invested with no one firm leading the deal, says Stephan Fromme, vice president of finance for Broadvew Networks.
Prior to this tranche, at the end of March, the company had $37.75 million. However, a later infusion by one investor brought the total round up to $40 million. “The round is still open, and we might raise a small amount of additional equity,” says Fromme.
Founded in 1996, Broadview has raised a total of $240 million, with $5 million coming from angel investors.
Besides providing retail services, Broadview serves small-and medium-sized businesses in the Northeastern and mid-Atlantic United States. The company offers its full service networks, including DSL, T-1 lines, local, long distance and international voice services, in addition to data transmission and high speed Internet services.