Kevin Martin, the former chairman of the Federal Communications Commission, has created a growth equity shop called Carmichael Partners. Martin and partner Brian D. Bailey have made their first investment in Bandwidth.com, which raised $22 million in its first round of funding. Carmichael raised the money from institutions and individuals for Bandwidth.com, but Martin says the partnership has yet to raise an actual fund because of the fast timing required for it to participate in the Bandwidth.com deal. Martin declined to discuss the details of raising the fund, citing SEC regulations.
“Once we had gotten together and talked with Bandwidth and some of the investors, there was not enough time to raise the capital in the timeline in which we had to focus on raising the money and on closing,” said Martin when asked why he didn’t raise a fund before doing this deal. He said Carmichael had only a few months to get the deal done, and raised the money in about 60 days.
However, it’s safe to say Martin and his partner Bailey are planning on raising a growth equity fund focusing on the media, telecommunications and technology sector, and Martin says the two hope to invest in deals that take advantage of several trends, such as the shift to all IP-based communications. Bandwidth.com fits that thesis, as it offers both software and network to deliver VoIP telephone services to businesses, as well as a wholesale business that provides the voice infrastructure for startups such as Pinger and Skype. Last week it also announced a data service via it’s newly-launched broadband.com nationwide broadband map.
John Murdock, president of Bandwidth.com, noted the funding helped the company acquire Dash Carrier Services, which provides E9-1-1 services. The rest of the funds will go toward growth efforts and marketing. In January, Bandwidth.com CEO David Morken noted the company was en route to filing for an initial public offering before the middle of next year. The company does have significant revenue, with plans to report $110 million or so in 2011, up from $83 million in 2010, with profits of about $15 million. The company also anticipates revenue growth averaging about 20 percent a year and has been profitable for 10 of its last 12 quarters, according to Murdock. It has 200 employees, with 20 news ones in Denver thanks to the Dash acquisitions.
Murdock said working with Martin and Carmichael helped Bandwidth.com raise capital without sacrificing its values and plans for the company, saying Bandwidth had been approached in the past by venture firms, but didn’t feel comfortable with the way Bandwidth would than have to build out its business. Martin says Bandwidth.com is the first investment for Carmichael, but that he and his partner Brian Baily have looked at others. Carmichael is based in Charlotte, N.C., and Bandwidth.com is based in Cary, N.C. — which means Martin won’t have far to travel to keep an eye on the deal’s progress. However, Martin stressed that Carmichael isn’t limiting itself to North Carolina deals.