Grande Bundles Up A Texas-Sized $231 Million First Round

Even though Grande Communications has not yet built its extensive fiber-rich broadband communications network along the I-35 corridor between Austin and San Antonio, the company has certainly managed to live up to its name when it comes to raising capital. Indeed, the firm recently completed a $231.8 million first venture round led by J.H. Whitney and The Centennial Funds.

According to data from Venture Economics, the Grande transaction ranks as the largest sum venture investment ever for a Texas-based company and the ninth largest overall in the nation’s history. It is also the most expensive round of venture financing completed so far this year.

David Hull, general partner at Centennial, said that his firm’s commitment came in at $27 million and that the J.H. Whitney investment was slightly higher. Both Hull and James Matthews, general partner at J.H. Whitney, will sit on Grande’s board along with existing company executives and Robert Hughes, managing director at Prime New Ventures.

“This company has a management team that we are familiar with and have a great deal of confidence in because they are really the most experienced team in the country when it comes to this type of broadband activity,” Hull said.

Additional participants in the 15-fund transaction included HarbourVest, AltaComm, Austin Ventures, Hoak Communications, CIBC, Trinity Ventures, BancBoston, Toronto Dominion, Kinetic, South Atlantic, Convergent and Weiss, Peck & Greer.

Proceeds from the deal will be used to help Grande build its network from the ground up, a far cry from the rebuilding of antiquated systems that some other telecommunications companies are currently attempting to do. Once completed, Grande will be able to offer customers a bundle package that will include analog and digital cable, high-speed Internet access and local and long-distance telephony.

Unlike other recent start-ups that have received exceptional venture funding, like WebVan Group Inc., Grande has no current plans to expand outside of its geographical target area.

“We feel very strongly that we need to get this market started before we look at other markets, either in Texas or beyond,” said Tipton Ross, executive vice president at Grande. “We want to make sure that we’re executing this business plan properly before looking at other opportunities.”

While such a wait-and-see attitude seems to be a sensible approach, it should also be recognized that Grande’s exclusivity only applies to the I-35 corridor. Indeed, companies such as RCN Corp., Knology Inc. and ClearSource Inc. are also in the process of building similar networks, albeit in different locations.

“There is a certain window to execute in this marketplace,” Hull said. “What will really help Grande, though, is that it has strong strategic partnerships with both Knology and ClearSource.”

Grande hopes to have its first customers signed on by the end of the year, an aspiration that Hull described as ambitious yet possible. “I wouldn’t bet against [the Grande team] getting it done,” he said.