|Investors Who Lead|
M/C Partners is the quintessential lead investor, combining broad company building knowledge with deep domain expertise to guide companies from early stages to profitability and ultimately to successful exits. They take an active role in their investments, working closely and effectively with management teams to deliver success and strong investment returns.
Telecom Review recently visited with Gillis Cashman, a Managing Partner at M/C, to get a feel for his ideas on the broadband investment landscape. Gillis leads the broadband infrastructure and services portion of the firm’s portfolio and works with their investment portfolio to insure their success. He currently serves as Chairman of Baja Broadband, and is on the Board of Directors of Zayo Group, Corelink Data Centers, CSDVRS, and GTS Central Europe. Previous board seats include ICG Holdings (sold to Level 3), City Signal Communications (sold to Cavalier Telephone), Elantic Networks (merged with Cavalier Telephone), FDN Networks (merged with NuVox Communications), and Cavalier Telephone (sold to Paetec).
M/C has been in the telecom space for quite some time having been an investor in Brooks Fiber in 1993. M/C has continued to be involved in broadband infrastructure purchasing ICG assets and bringing capable management on board to insure its success. M/C backed Dan Carrusso to run ICG and it became cash flow positive in six months. That investment went from eight million in revenue to 225 million in revenue in just eighteen months.
Through their experience with ICG, they were able to identify a number of valuable investment trends in the fiber services sector. This effort led to the beginning of Zayo Broadband, which has now become a leading growth investment and consolidator of fiber assets in the US. M/C backed Dan in starting Zayo in 2006. Since that time Zayo has purchased and integrated over twenty other firms. Typically they look for undervalued and under managed firms and then have their experienced management groom the acquisitions to be assimilated into Zayo. Zayo recognized that the fiber sector had hit an inflection point as bandwidth demand had caught up with the excess supply created in the early 2000’s. Zayo was formed in late 2006 with the purpose of creating value for its shareholders by applying efficiency, scale and growth to undervalued regional fiber companies in a focused consolidation towards providing national bandwidth infrastructure services. After 5 years, twenty one acquisitions and substantial follow-on organic growth, Zayo is now a leading player in the bandwidth infrastructure space as evidenced by its impressive set of infrastructure assets, margin expansion and consistent track record of value creation.
M/C Partners focuses primarily in the services sectors of communications, technology, and media. The migration to cloud computing is changing the distribution and consumption of traditional communications, making broadband networks an ever more critical role in the evolution of computing. The network is the foundation of cloud computing and the migration to Cloud services is certainly driving demand.
Capacity imbalance at the edge of the network is driving substantial upgrade of “legacy” network infrastructure.
Processing power in the computing world has far outpaced capacity of access networks making the Metro and long haul network a more valuable asset. Seventy percent of buildings in the US with twenty or more employees still only have copper access. The metro providers that extend their broadband network to more of these buildings will bring a higher value to their network.
Broadband services based models are well positioned as cloud based distribution requires aggregation and management of an increasingly fragmented and diverse set of services.
Management Philosophy for Investments
M/C proactively seek out well-positioned entrepreneurial managers and companies that fit their investment criteria. They look for aggressive, insightful executives who have the capacity to build substantial companies and to create significant shareholder value.
It is not possible to understand an entrepreneur’s day-to-day challenges in the absence of deep domain expertise and knowledge in their industry. M/C will partner with the best entrepreneurial management teams and provide their perspective and resources to support the development of their business into a significant company.
This proactive role they take in assisting management in the company building process has contributed significantly to the long term track record of M/C’s investment performance. M/C backs aggressive, insightful entrepreneurs who have the capacity to build substantial companies and to create significant shareholder value.
M/C participates actively in their portfolio company’s growth and success as a member of the Board of Directors. The proactive role they take in assisting management has contributed significantly to their long term track record of top quartile performance. They maintain a hands-on approach with the company’s senior executive team to provide value-added input that includes perspectives on strategy development, recruiting senior team members, raising capital, and M&A. M/C nurtures each company in a different manner since everyone operates at different capabilities.
Broadband Network Industry Changes
M/C recognizes that we are on the verge of a massive migration of computing from the device to the cloud and sees broadband networks as the key. Communication service providers are well positioned to capitalize on these cloud services, however, they will need to partner with or acquire IaaS providers to augment their product set and sales/ support capabilities.
Industry changes combined with strong capital and physical barriers to entry make broadband infrastructure providers clear beneficiaries in the near future.