Investors See $200M Through Looking Glass

If you promise to build it, the funding will come.

Despite rumors of a venture market slowdown, investors are continuing to throw sacks of cash at telecom infrastructure start-ups that have grand networking plans, but no immediate revenue streams. Last week, it was Looking Glass Networks Inc.’s turn as it announced that it had closed a $200 million Series A round back in April.

Madison Dearborn Partners led the mammoth transaction with Battery Ventures acting as the only other institutional participant.

Madison Dearborn made similar news last month when it pumped $55 million into a $141 million initial round for open-architecture telecom provider Cbeyond Communications LLC. The private equity firm’s actual investment in Looking Glass was unavailable at press time, although Sunit Patel, co-founder and chief financial officer with Looking Glass, said that it came in at over $100 million.

“We felt that we had to get a substantial amount of capital behind us because what we’re planning to do is very capital intensive,” said Lynn Refer, co-founder and chief executive of Looking Glass. “We were fortunate, though, that we didn’t have to shop this extensively because we found a very receptive audience in Madison and have developed a good relationship with them.”

Proceeds from the deal will be used to help the Oak Brook, Ill.-based issuer begin building its national network of facilities-based, dense fiber count systems. The first rollout,scheduled to occur almost simultaneously in 10 major metropolitan markets, will take place in the second half of 2001, pending certain regulatory approvals.

Looking Glass will likely begin prepping a second round of funding sometime around the beginning of next year.

“If we reach certain milestones, we will need to raise additional capital because we want to expand up to [a total of] 25 metropolitan markets,” Patel said.

Both Patel and Refer founded Looking Glass this past March after successful stints with MCI WorldCom. Patel served as treasurer while Refer was senior vice president of network planning and engineering.