SpiderCloud Raises $35 Million At Near $200 Million ValuationApril 11, 2012
Wall Street Journal
by Spencer Ante
Networking gear maker SpiderCloud Wireless has raised $35 million in venture capital as the start-up prepares to upgrade its technology and make a run at profitability.
The financing round values the four-year-old company at just under $200 million, a person familiar with the matter said. Charles River Ventures, Matrix Partners, Shasta Ventures and Opus Capital were among the venture firms that participated in the deal.
The deal is vote of confidence in an unprofitable start-up that faces lots of competitors in the market for technology that promises to improve cellphone coverage inside buildings. To succeed, it has to persuade companies and building owners to pay to install networks that offer better connections to their employees or tenants but may not bring in added revenue.
Telecom giant Vodafone said in February that it would start selling SpiderCloud’s technology to the carrier’s customers, and SpiderCloud is hoping to sign other carriers to marketing deals as well.
“There is lots of competition in that space,” said Sundeep Rangan, associate professor of electrical and computer engineering at the Polytechnic Institute of New York University.
The deal is a relatively rare example of a large investment in an infrastructure company as most venture capitalists have shied away from capital-intensive industries in favor of putting money into consumer Internet and software start-ups that don’t require a lot of capital to get off the ground. In total, after this latest investment, SpiderCloud has raised more than $100 million.
Last year, venture capitalists invested about $268 million in 29 wireless communications equipment companies, down from $450 million invested in 27 companies in 2010, according to Dow Jones VentureSource. Investment in wireless equipment has been decreasing steadily since 2007, when it last peaked at $767 million invested in 57 companies. In 2000, at the height of the telecom boom, venture investors poured nearly $1.6 billion into 103 wireless gear makers.
For the most part, cellphone coverage inside buildings falls to cell towers outside, which can be spotty. Sometimes, buildings come with so-called distributed antenna systems linked with pricey fiber-optic connections.
SpiderCloud’s approach is to tie together what amount to mini cell towers with existing Ethernet connections, which it says are cheaper. Research firm Infonetics expects these types of smaller cell technologies to grow rapidly over the next few years as carriers seek more efficient ways to provide greater capacity to wireless networks.
“One of the biggest issues in wireless is the lack of in-building coverage,” said Bruce Sachs, a partner at SpiderCloud investor Charles River Ventures. “There haven’t been any good solutions.”
The technology currently supports 3G traffic, and SpiderCloud has plans to support Wi-Fi and next-generation 4G technology in future radios.
SpiderCloud CEO Mike Gallagher, who has held executive roles at other wireless companies such as FiberTower Networks, Flarion Technologies and Nortel Networks, said this round of venture capital will be the company’s last.
“Revenue is coming in now,” he said. “Small cell technology is the architecture of the future.”