Blog Post

Best Buy grabs Speakeasy, Covad Smiles

After fighting it out with the big boys for nearly half a decade, and being in business since 1994, Speakeasy has decided that it was time to sell. Who can blame them… they were fighting it out with AT&T, Comcast, Qwest… the telco rogues gallery.

The retail chain paid about $97 million for Speakeasy, a DSL and broadband reseller, all packaged nicely in a “geek cred” bundle. Speakeasy will now be a fully owned subsidiary of BestBuy. The deal is a decent exit for venture capitalists who pumped in around $27 million into Speakeasy. Backers include BV Capital, Granite Ventures and Intel Capital. It’s also potential good news for Covad, Speakeasy’s wholesale provider.

Why Best Buy? Speakeasy CEO Bruce Chatterley says it’s going to part of the Best Buy for Business service, which indicates that Speakeasy might be getting out of consumer services – otherwise Best Buy could lose some of the big broadband reselling deals it has with incumbents.

This shift of focus is good for Speakeasy’s wholesale broadband partner, Covad, which has the requisite infrastructure in place to service business customers, and could see an uptick in demand if Best Buy does actually manage to sell Speakeasy’s services alongside computers, phones, printers and whatnot. Just another wrinkle in the SMB VoIP market!

Larry Dignan’s take is along these lines, except more indepth.

8 Responses to “Best Buy grabs Speakeasy, Covad Smiles”

  1. I can’t really see how 3.6X return over 13 years is a “decent” exit for the VCs. Sure all $27M wasn’t put in on day one, which makes the time value of money on this deal probably look a little bit better, but I doubt any VC would brag about a 3.6X return over a more standard startup lifespan of 5 to 7 years. Any VC firm that returned 3.6X over 13 years on a fund would be out of business.

  2. For many, SpeakEasy has lived up to its name for a ‘ask-no-questions’ approach to what people have been using their connection for. I’ll say no more other than to remind everyone that 50-80% of ISP traffic (ie cost) is p2p.

    However, I wonder whether Best Buy, in the face of improving profits and service reliability for it’s business customers, will er on the side of the ‘prohibition’ and turn the ISP into a dry shop.

    I think that will ultimately turn many of the ‘geeks’ away.

  3. I think the BestBuy purchase will further erode what “geek cred” Speakeasy has left. Their service has diminished extensively over the last couple of years and their pricing premium does not merit the service levels offered. I was a customer in varying forms (SDSL, residential DSL, and biz DSL) since 1998 and have been shying away from recommending them for friends / colleagues.

    I know of at least two self labeled “geeks” that are planning on moving to another provider.

    Myself, I moved over to (here in the Bay Area) late last year.