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Though it may seem as if politicians in Washington, D.C. have a hard time agreeing on anything, those on both sides of the aisle seem increasingly keen to support entrepreneurs and their communities. Some recent examples include the passage of legislation expanding crowdfunding under the JOBS Act and meetings similar to one hosted last month by the Global Accelerator Network in which we worked with the Small Business Administration to gather 16 accelerators to demo their programs for the White House and SBA funders.
Much progress has been made to ensure that those in Washington are hearing entrepreneurs’ concerns, but we still have a long way to go – especially with connecting politicians to those in the seed-stage technology sector. Politicians in our federal government are listening to entrepreneurs, but we very rarely see congressmen personally sit across the table from early-stage tech investors and their founders. When this does occur, however, representatives learn much more about what startups really want and need than they would hearing feedback through second or third parties, and they’re much more likely to take supportive action.
That is why the Global Accelerator Network is thrilled to support the first ever Startup Day Across America on August 29. This one-day bipartisan event, led by the U.S. House of Representatives Caucus on Innovation and Entrepreneurship, will connect members of Congress with startups and accelerators in their respective districts. We believe this is a great opportunity for startup communities to connect with their congressional representatives – both to highlight the positive contributions startups bring to their communities, as well as raise awareness about startups’ needs on a local and national level.
If you are interested in learning more about the Startup Day Across America, please contact Eve Lieberman in Congressman Jared Polis’ office who will connect you with the person leading the charge in your district.
I’m intensely proud of both the amazing startup community in Boulder as well as the many significant companies that have been – and are being – created in the little town of 100,000 people I call home. I regularly talk about the ones we’ve invested in through Foundry Group, but this only covers a part of the awesomeness that is going on here as Foundry Group has a very tight thematic focus.
As Boulder continues to gain visibility as a great place to create companies, I’ve decided to highlight some of the entrepreneurs – and their companies – who have contributed to Boulder in significant ways.
Dan Caruso, the co-founder/CEO of Zayo Group, is one of them. I first met Dan around a decade ago when Howard Diamond, another incredible contributor to the Boulder startup community, introduced us. Howard was at Level 3 at the time – they had acquired his previous company Corporate Software (which I was an investor in) – and he knew Dan through that experience. Over the last decade, I’ve gotten to know Dan, watched as he’s built an incredible $6 billion market cap company headquartered in Boulder, while contributing relentlessly to the Boulder startup community.
I asked Dan to write a guest post talking about Zayo’s story. It’s great – and follows. Dan – we are lucky to have you – and Zayo – in Boulder.
“Fiber in Downtown Boulder?” was the title of an email sent to me by Brad, after he had heard from one of his CEOs that Zayo is constructing fiber in Boulder. “If true, how can I help?”, he continued.
Years ago, when I first met Brad, I didn’t “get” him. I had recently left Level 3 Communications. I was one of the day one execs of LVLT, as well as an early member of the management team of MFS Communications. It is understandable that I considered myself to an accomplished entrepreneurial-minded executive. Yet I felt so disconnected to Brad and the culture around him. It took me several more years to understand Brad, and during this time I developed a deep appreciation of his passion for entrepreneurism. I was drawn to his unique ability to promote ideas, create awareness, and fuel momentum. I sought to mimic his propensity to leverage social media.
“How can Brad help?”, I pondered.
“Help me create more awareness about the contributions that Zayo is making toward the Front Range entrepreneurial community.
Brad, entrepreneurial as ever, delegated the task back to me. “How about you write a post for my blog?”
Sensing an opportunity, I responded “How about I write two?” This is the first. The next one will describe our extensive fiber build across the front range.
I will provide a quick synopsis for those who prefer a two-paragraph summary. In late 2006, Zayo was a pure start-up headquartered behind Nick and Willy’s on 8th and Pearl. Today, Zayo has eclipsed $1.1Bin revenue and $600M in EBITDA, leading to an estimated Enterprise Value in the vicinity of $6B. We have 3 offices in Colorado, with our headquarters on the 2nd floor of 29th Street mall. In addition to directly employing 250 people across the Front Range, we indirectly employ many more related to our multi-million dollar fiber build across the front range. Dozens of recent graduates of Colorado’s university system are Zayo-ites.
Boulder is an incredible entrepreneurial community, and I enjoy being immersed in it. I am excited to see this innovative energy spreading across the front range, through Startup Colorado and other initiatives. I am proud that Zayo is a vibrant example of our community’s robust start up ecosystem.
For those who prefer a slightly longer version, here is the Zayo Story in a nut shell.
In June of 2006, we sold what remained of ICG Communications to Level 3. The ICG team went to Level 3 as part of the transaction. I didn’t.
Two years prior, ICG was a public company preparing for its second bankruptcy. My group was the only that offered an alternative to Chapter 7/11. We paid them $8.7M and took them private. By the time we sold to Level 3, our total proceeds to equity owners and management were $225M. For those without a calculator nearby, that’s a 25X return in 2 years.
Nonetheless, I was out of a job.
Though ICG was headquartered in south Denver, we opened up a small satellite office on 8th and Pearl — right behind Nick and Willy’s. In the sale to LVLT, we kept a portion of this office. One by one, many of my colleagues extracted themselves from Level 3 and pondered “what now”. By late 2006, we formed Communications Infrastructure Investments. Today, CII d/b/a Zayo Group.
Our investment thesis was simple. Bandwidth was busting — and this would continue beyond our children’s lifetimes. Fiber was the workhorse of the Internet — and nothing would alter its importance for as far as the eye could see. Most importantly, drinking too much tequila leads to a hangover that makes it hard to look at — let alone taste — tequila again.
Point 3 requires more of an explanation. The late 1990s saw a fiber tequila party that started out wild — investors poured money into start-ups and fiber networks were constructed throughout the land. Way too much fiber tequila was gulped, and the ensuing telecom meltdown caused a hangover of epic proportion. As we hit the early 2000s, investors and strategics felt their stomach’s gargle at the sight of a fiber-labeled tequila bottle. You know that feeling?
Our ICG experience gave us different perspectives. First, many fiber networks had consolidated into a handful of platform. The balance between supply and demand of bandwidth was rapidly improving.
Second, we saw an opportunity to be a consolidator of the remaining fiber properties. We called these fiber orphans — companies whose roots dated to the telecom boom but which had not yet been consolidated into a nationwide platform. These companies somehow navigated their way through the meltdown. By 2007, they were doing quite well. However, the tequila hangover persisted and few investors or strategics were paying attention to them.
Third, we developed a thesis around “Bandwidth Infrastructure”, a term we coined. We did not desire to be a traditional telecom company. Instead, we sought to provide raw fiber, wavelengths, ethernet, IP, and technical space to those entities that needed a whole lot of bandwidth. Circa 2007, this was considered a ridiculous approach. Even today, we are sometimes poked by rivals for our infrastructure approach.
Between 2007 and 2013, we acquired 25 companies. We now have over 80,000 route miles of fiber, mostly in the U.S. and London. Our fiber is connected to nearly every significant colocation, hosting, and carrier hotel facility. Our biggest customers are the wireless carriers and big content/Internet companies. We raised $2.7B of debt and $870M in equity in three rounds. Our initial investors have not sold, though they are enjoying a 4 – 5X mark. Our equity IRR has averaged around 50% since inception.
Zayo is in this for the long term… the very long term. My aspiration is to be at the helm of Zayo for a few more decades. Zayo will be to bandwidth what Amazon is to the cloud and what Equinix is to colo. Zayo will foster the development of additional start-ups, either within Zayo or as spawning-offs. The bandwidth supplied by Zayo will positively effect the lives and livelihood of countless people throughout the world. As Zayo continues its quest, it will bolster Boulder and the Front Range’s reputation as a top tier centers for Entrepreneurship and Innovation.
Following is a guest post by Zack Rosen, co-founder and CEO of Pantheon. Pantheon is building “A big badass platform that will run 30% of the Internet.” They are making it easy for professionals to build, launch, and run websites. Pantheon is one of the Silent Killers in our portfolio – and I’m immensely proud of the progress they are making and excited about their future.
This post was an internal email to the Pantheon team following a major feature release (Multidev). When I saw it, I asked Zack if I could post it on my blog as an ode to all startups. Many of you are out on the frontier, and I thought Zack captured the essence of it in his message to his team.
From: Zachary Rosen
To: Pantheon Staff
Date: Thursday, July 18, 2013 2:19:42 AM
Subject: Welcome to The Frontier
The Frontier Thesis was a theory advanced by historian Frederick Jackson Turner in 1893 that American democracy was formed by the American Frontier.
“American democracy was born of no theorist’s dream; it was not carried in the Sarah Constant to Virginia, nor in the Mayflower to Plymouth. It came out of the American forest, and it gained new strength each time it touched a new frontier.”
You may have noticed me acting slightly more neurotic or animated lately. There is a reason for that. Apologies if I am bugging you out—it’s going to get worse.
I am very, very excited to be back here, on The Frontier.
I’ve been here before.
Then one day I messed up, clicked the wrong button, and ordered hundreds of dollars worth of non-refundable, esoteric, nerdy used books…and over-drew my bank account. I remember thinking when they arrived, “Well, I guess I may as well read all of these stupid books that bankrupted me.”
I’m very glad I did.
That summer, this bumpkin/badass former governor from Vermont running for president (Howard Dean) had found this guy Joe Trippi to run his presidential campaign. It became clear to me that Joe had read the same books I had, and that he intended to see if the shit in the books actually worked.
I had to be there. The summer of 2003, I started an open-source (Drupal-based) project for the campaign (Deanspace), got a job in the campaign HQ in Burlington, VT, dropped out of school, and had about the most profound professional experience one could at age 19 in 2003.
I spent a year on the Dean campaign Web Team during the presidential campaign of 2004. We lost the campaign badly, but we won a major battle on The Frontier of Global Politics in the age of the Internet.
The Dean campaign Web Team proved a very simple but important idea to the world that year. We proved that you could challenge the political establishment and beat them at their own game (fundraising) by appealing directly to supporters via the Internet. That idea—which our team made work—has changed the world.
Barack Obama would not be president today without the path the Dean web team blazed. Knowing this has permanently altered the way I view my work.
Friends from the campaign went on to run Obama’s Internet operation. You’d have a hard time making the case that Obama could have won without their help.
That experience set the bar for me in my career. Ever since then, if my work is not on that scale, then I feel like I am wasting my time on this planet.
I’m at home back here on The Frontier.
What it’s like on The Frontier
For me, launching Multidev put Pantheon clearly on The Frontier. We’re doing new shit the world has never seen before.
Here are a few of my thoughts about our time here:
1. You know that quote from Margaret Mead? “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” The Dean campaign Web Team was 20 people, about the same size as Pantheon is today. Small teams can do huge things.
Accomplishing huge things is not easy. On The Frontier, there’s no rule of law and there are no guarantees. There are consequences if we get it wrong. We won’t be destitute, but we’ll always wonder if we could have done better.
On The Frontier, we know this, and we still go after the big problems, six-shooters blazing.
2. There are not very many people out here on The Frontier. It can be strangely quiet and peaceful. Everyone has so many opinions when you make your journey out! “Well, what will you do when X happens?” “That won’t work.” “I don’t get it.” Or, my favorite, “I’d do it this way.”
But when you get out here, you get to see what will really work and what won’t. You survive by your wits. You learn to listen to and trust your gut.
How many other people are out here working as hard as we are to fundamentally fix website tech? …. *crickets*
3. What we are doing will look obvious in retrospect. “Duh, you can raise a ton of money for a presidential campaign online” is now common knowledge, but in 2003, we were looney. “Duh, websites are developed, launched, and run in the cloud” will be common knowledge soon enough.
The biggest ideas are usually the simple ones. They seem so confusing and hopeless before, somehow, all of a sudden, they are taken for granted.
Before any big city, there was once The Frontier.
4. We are blazing the path for everyone else. We are the leaders in our market, and they will follow, after we’ve found and laid the path. The entire world will follow us after we’ve found out how to make building, launching, and running websites easy.
Notice the other paths laid by other teams out here on The Frontier. This work is holy. When you pass another team blazing their path, tip your hat. This shit isn’t easy. Be gracious on The Frontier.
5. This is a special experience. We’re not saving the world directly. We aren’t surgeons in the O.R., or soldiers in harm’s way. We’re engineers laying down foundational tech that others will build on top of. Most will never see our work. But, through our work, we have the opportunity to shape what’s possible in the world around us.
With Multidev we set a bar for the software industry on what is possible when custom software is built, launched, and run in the cloud. The other leaders in our space are behind us. We are the ones who have built a cloud platform with such deep (full website stack) and broad (dev -> deploy -> scale lifecycle) capabilities, so we get to be the ones who discover what is possible.
You will remember this work, your time on The Frontier, for the rest of your life.
The JOBS Act, which was approved by Congress and signed by President Obama with much fanfare over a year ago, was intended to help small business. It is, after all, called the Jumpstart Our Business Startups Act. A number of the provisions have been slow to get written into law and the SEC has missed their deadlines on a bunch of stuff, including the often talked about equity crowdfunding activity.
Recently, the SEC weighed in on a number of the things they were required to with much fanfare. Fred Wilson wrote Let The Games Begin in response to the SEC lifting the General Solicitation Ban. However, Fred, and many others, missed the new proposed Amendments to Regulation D, Form D and Rule 156 under the Securities Act. And they look like one scary mess that could undermine the whole thing if approved.
Some posts with analysis of this have finally started to appear. A good summary is by Joe Wallin at his Startup Law Blog titled Proposed Rules Hard on Startups. And I’ve gotten a number of emails with similar analysis. My favorite summary was from a very experienced law firm.
“The SEC giveth (as mandated by Congress) and taketh away (by its own mandate).
It is incredible that the SEC finally got around to implementing rules to remove the ban on solicitation (as it was required by statute to do so in 2012), but concurrently proposes new rules intended to retard the benefits of easing the capital formation process (the goal of the JOBS Act).
The new proposed rules will require a Form D to be filed 15 days in ADVANCE of a Reg 506 offering and after, substantially expand the scope of information required to be disclosed in Form D and disqualify an issuer from relying on Rule 506 for one year if the issuer does not comply with the new filing requirements (including a requirement that the Form D be timely filed). The new rule also would require filing with the SEC of all written general solicitation materials. So much for deregulation!”
Seriously? More commentary from one of the emails I received follows:
“The new rules and rule proposals were a kind of packaged effort to address the Congressional mandate in the JOBS Act, while attempting to maintain investor protection. Apparently, the package was enough to mollify Commissioner Walter, but Commissioner Aguilar was unwilling to go along. In his view, the rules adopted come at the expense of investor protection. He reiterated that the record supports the argument that elimination of the ban on general solicitation will facilitate fraud and viewed the adoption of the rules without appropriate safeguards as “reckless.” He also contended that the proposal to study the practical effects and then adopt rules if necessary would come too late – closing the barn door after the horses have already escaped. Although he voted for adoption of the disqualification rule, he also objected to the narrowing of the categories of individuals covered, as well as the application to only prospective events, especially given the two-year delay in adoption of the final rule. On the other side of the aisle, Commissioners Paredes and Gallagher both objected to the proposal to facilitate monitoring of market changes resulting from elimination of the prohibition. They both viewed the proposal as placing an undue burden on capital formation and undermining the objectives of the JOBS Act.”
While the “proposed rules” are still “proposed”, hopefully the SEC will reject these new proposals, especially in the context of Congress’s mandate to Jumpstart Our Business Startups.
Many of you know that I’ve been working on several new books this summer. I’m completely obsessed with the radical transformation of our society from a hierarchy to a network, the integration of the machines into every aspect of our lives, and the radical transformation of the way – as humans and organizations – we work. Hopefully this shows through in what we invest in (for example, most recently Full Contact and Modular Robotics).
As a result of this obsession, I’m launching Startup Revolution, starting now.
I view Startup Revolution as a movement. Since my partners and I started Foundry Group in 2007 we’ve had an incredible experience working with a hundreds of entrepreneurs across the US in the 50 or so companies we’ve directly funded. We co-founded TechStars and have gotten to work with thousands of amazing entrepreneurs and mentors, many of whom are also incredible entrepreneurs. We’ve written a few books, including Do More Faster and Venture Deals and met many more entrepreneurs through them. We’ve invested in other VC funds with our own money (and subsequently met even more entrepreneurs) and evangelized tirelessly about startups around the US, working with organizations like the Startup America Partnership.
Lots of community has developed around startups, what I’ve learned, and what I think at the Feld Thoughts site, but I want to create a community that is broader. My partners and I continually learn all kinds of things about startups. We learn by doing – through our investing at Foundry Group. But we also learn by teaching – through writing (books and blogs), talking to entrepreneurs continually about what we are thinking, and evangelizing the power of startups and entrepreneurship as widely as we can. And all of this makes us better investors.
The Startup Revolution movement is another step in this. Like any new thing, I’m launching early and iterating often. The next few moves are the Startup Revolution site (and subsites for each book – Startup Communities, Startup Life, Startup Boards, and Startup Metrics). Leave anything you want me to add, change, or think about in the comments.
Finally, pre-orders for Startup Communities: Building an Entrepreneurial Ecosystem in Your City and Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur are now up on Amazon.
The Startup Revolution is well underway. Don’t be left behind.