Speakeasy successfully raises $24m in additional funding.
Capital time for cash hunt
By Tricia Duryee
Seattle Times Eastside business reporter
Business: broadband-services provider
Headquarters: Seattle’s Belltown
2003 revenue: $49 million
Fifth Round: $24 million
Money raised: $50 million
Key investors: 3i, BV Capital, Ares Management, Cornerstone Ventures, Matthew G. Norton, Granite Ventures.
Venture capital is not a foreign concept to Bruce Chatterley — though each time he goes to get more, it feels like it could be the first time.
When he was CEO at Seattle’s ViAir, he saw how easy venture capital was to obtain in the Internet boom and how hard it was to get a bit later. Instead of trying again last summer, he sold ViAir to California-based Visto.
This time, as chief executive of Seattle-based Speakeasy, it was more of the same — meaning different.
Speakeasy, which provides high-speed broadband services, plans to announce today it has raised $24 million in a fifth round of capital, bringing the total it has raised to $50 million.
Menlo Park, Calif.-based 3i and BV Capital in San Francisco led the round, with previous investors Ares Management, Cornerstone Ventures, Matthew G. Norton and Granite Ventures participating.
Chatterley’s pitch was different this time, he said.
The company is no longer a startup waiting to be accepted. It’s 10 years old, had $50 million in sales last year and has been profitable for a year.
The Speakeasy announcement follows other double-digit financings by local companies. The rebound predicted by venture capitalists earlier this year could be well under way.
Other companies that have landed capital in the past three months include World Wide Packets, which raised $24.5 million; Widevine, which raised $13 million; UIEvolution, $6 million (expected to grow to $10 million); and In2Gr8, which simultaneously merged with EYT and raised $20 million.
Investors also have noticed the increased activity.
Chad Waite, general partner at OVP Venture Partners in Kirkland, said the number of companies he watches at any given time has tripled in recent weeks.
“Our activity level is pretty high,” Waite said. “It’s not that it’s been bad, but in the last month or two, it’s been pretty high. At any one time, I (usually) have four to five open projects. It’s been at 12 or 15 in the last week.”
Patrick Ennis, a managing director at Arch Venture Partners, is seeing a lot of the same signs. Last week, Arch announced it had raised a new $350 million fund.
“Things are absolutely picking up nationwide and in Seattle,” Ennis said.
“There’s more business plans of higher quality from companies that used the downturn to re-examine their business and spent more time with their customers,” he said.
For Speakeasy, it was constant and deliberate growth of the business over the past few years that led to the most recent round of funding, Chatterley said.
The company, which started out as an Internet cafe in Belltown, slowly evolved into an Internet service provider of dial-up services, later adding high-speed digital subscriber lines, or DSL, across the nation.
Today, the 170-employee company specializes in high-end customers that use a lot of bandwidth — those who host Web sites, play intensive online games, or run a small business. The idea is to attract the “power” or “expert” users, as Chatterley calls them. They pay an average $95 a month for speed, reliability and more services.
“It’s a segment that’s willing to pay a premium for the best support,” Chatterley said.
Its services have separated Speakeasy from the pack. It may be the only company in the country with a program called WiFi NetShare that allows customers to share broadband service — and the cost — with neighbors through a wireless Internet signal.
“Telephone or cable companies would usually shy away from such a thing because they think they’ll lose a couple lines,” Chatterley said. “But it’s broadband. We think you should do whatever you want.”
Speakeasy has capitalized on these liberal policies, largely gaining customers through word of mouth. That could change, however, with this round of funding.
Chatterley expects to hire a chief marketing officer to promote the company. The broadband industry is expected to grow by 80 percent this year, he said.
The money will also help upgrade data centers across the U.S. and launch Voice over Internet Protocol (VoIP) sometime this summer. VoIP allows users to make and receive phone calls over their broadband connection.
David Silverman, a partner at 3i, said Speakeasy has found a way to leverage the large fiber-optic network crisscrossing the country without having to have paid for its initial investment.
“They took advantage of the glut in supply of fiber and as a result are making money,” he said.
Silverman said he expects this round of funding to be the company’s last.
Chatterley would not speculate on prospects of an initial public offering.
“There’s all kinds of interesting rumors out there,” Chatterley said. “But we aren’t managing for a specific outcome other than profitability and rapid growth, and then those things take care of themselves.”