November 22, 2000

Access Receives $6.5 Million

LocalBusiness.com

Southeast telecom deals ring on, more softly

Dec 28, 2000 09:03 AM ET By Ray Bolger, LocalBusiness.com CHARLOTTE, N.C., Dec. 28 (LocalBusiness.com) — Telecommunications companies in the Southeast that received private equity investments during the year represent a broad array of technologies and a diverse range of business plans. Those companies in the sector that inspired confidence among venture capitalists this year include development-stage firms chasing after the next killer app for wireless devices to new challengers for market share in the competitive local exchange market.

Investment rounds ranged from a few million dollars for some early-stage companies to a record-breaking $402 million for Charlotte-based Carolina Broadband in July. Other mega-deals for telecom companies during the year included a $108 million round for Tampa, Fla.-based Switch & Data, a $156 million round for Pensacola-based Network Telephone and a $170 million round for Charlotte-based NewSouth.

The final period

In the fourth quarter alone, LocalBusiness.com reported a total of $195 million worth of investment in 11 telecommunications companies in the four coastal states of the Southeast.

Orlando-based CAVU Inc. led the way in terms of the largest round raised during the quarter. CAVU is a high-speed Internet access provider with plans to use the proceeds to extend its reach into Jacksonville, Orlando, Charlotte and Columbus by the end of the year. The company attracted a first round of $55 million led by Inveso Private Capital.

Another Orlando-area company, MeshNetworks, a wireless technology developer, closed on a $26 million second-round deal with the venture capital affiliate of Comstellar Technologies Inc., a New Jersey-based Fortune 500 company. MeshNetworks plans to commercialize wireless Internet technology that ITT Industries originally produced for the U.S. Department of Defense.

And another Orlando-based telecom, Florida Digital, which sells integrated communication services to businesses, received a $2.3 million placement from long-time investor M/C Venture Partners in Boston. The cash infusion comes as the competitive local exchange carrier enters its seventh market in Cocoa, along Florida’s Space Coast.

Florida Digital wants to enter several other markets in the state over the next 12 months. The company is already is up and running in the major markets of Orlando, Tampa, Jacksonville and South Florida’s three main cities. Meanwhile, a two-year-old Tampa-based phone company, 2nd Century Communications, which has raised a total of $155 million since its founding, laid off half its 172 workers two weeks ago to attract new private equity, the company told LocalBusiness.com.

Action in the Carolinas

Three companies in North and South Carolina garnered $62 million of venture cash in the fourth quarter, or 32 percent of the total raised by telecom-related companies in the entire region.

In Greensboro, S.C., QServe Communications Inc., which provides services for the wireless communications industry, raised $32.5 million during the fourth quarter, its second round of funding. QServe’s client list includes AT&T Wireless Services, Alltel Mobile, Nextel, Sprint, Omnipoint, Bell Atlantic Mobile, Teligent, Metricom, American Tower, Crown Castle and SBA Communications Corp.

Up the coast in North Carolina, Wilmington, N.C.-based TalkingNets, a telephony application service provider, received $20 million in second-round funding in November, as it launched its service in two markets, Denver and Cleveland. Menlo Park, Calif.-based Venrock Associates, which invested in TalkingNets’ first $2 million round earlier this year, came back for the second round. RTP, N.C.-based OptXCon Inc., which makes an optical cross-connect switch for fiber optic networks, closed on a $12.5 million round of equity financing led by Boston Millennia Partners and Miami-based H.I.G. Capital. Corning Innovation Ventures, Corning, N.Y., also participated in this round. The company received $1 million in seed funding in July from Avda Optical Networking, a German firm.

Hotlanta deals

In Atlanta, four investments for privately held telecom companies during the fourth quarter totaled $42 million.

Telscape International Inc., a publicly traded telecommunications services company, announced that it closed a private placement of $14 million, along with three credit facilities totaling $81 million. Investors in the company included Cleveland-based TSG Capital, Sandler Capital of New York, Atlanta’s EGL Holdings and Cordova Capital and Oger Pensat Holdings of Bermuda. Atlanta-based Incanta, which provides content for broadband service providers, closed a $12 million second round of funding and added singer Jimmy Buffett its board.

Investors in the Incanta deal included: Toronto-based Mosaic Venture Partners; AT&T Canada; Toronto-based Blackboard Ventures; Canada-based Celtic House International; Tim Cobb, CEO of Atlanta-based Edaflow Corp.; California-based Intel Capital; Boston-based Marathon Capital; and Imlay Investments and Reicon Capital, both based in Atlanta.

Early in the fourth quarter, Atlanta-based LiquidLight, a fiber-optic technology developer founded this spring that now employs about 50, closed on a $9 million round.

Macon, Ga.-based Access Integrated Networks, a communications service provider to small and midsized businesses, closed on a $6.5 million round of venture capital led by Atlanta-based C&B Capital. Access has a network interconnect agreement with Bell South through a deal reportedly valued at $800 million, which the two companies struck during the first part of the year. Raymond Bolger covers the Baltimore area for LocalBusiness.com. E-mail him with story ideas or comments.