Source: CRAIN’S Chicago Business
By: John Pletz on July 23, 2015

ExteNet Systems, a wireless-infrastructure company whose business is soaring with the demand for video and data by smartphone and tablet users, is Chicago's newest “unicorn” with a valuation over $1 billion.

The Lisle-based company recapitalized, with two new investors coming in to replace earlier backers in a deal that values ExteNet at more than $1 billion. Such companies, known as unicorns, are becoming common in Silicon Valley but are rare here.

GrubHub went public last year with a valuation near $2 billion; Fieldglass sold to SAP for $1 billion. Braintree sold for $800 million. Avant and Raise.com reportedly were valued at near $1 billion when they raised money this year.

ExteNet, which started 13 years ago, didn't say how much money is changing hands. But it will cash out previous investors, which include Columbia Capital, Centennial Ventures, Sevin Rosen Funds, CenterPoint Ventures, Palomar Ventures, Quantum Strategic Partners (managed by billionaire George Soros' firm Soros Fund Management), and SBA Communications. It also will provide growth capital for ExteNet.

"It's cash plus growth capital," Manire said. "(The new investors) have raised enough money to fund the needs of the business."

The money is coming from Boca Raton, Fla.-based Digital Bridge, an investment partnership between former Blackstone Group partner Ben Jenkins and Marc Ganzi, former CEO of another communications infrastructure company, Global Tower Partners. Ganzi will become chairman of ExteNet. The other investor is New York-based private-equity firm Stonepeak Infrastructure Partners.

FOUNDED TO FILL GAPS

ExteNet was founded in 2002 by Manire, a U.S. Robotics veteran, with the idea that there was a need for someone to fill in the gaps in wireless coverage that individual carriers wouldn't find economical to fill by building out their own networks. Instead, multiple carriers could foot the bill for networks built by ExteNet.

Infrastructure is costly, and ExteNet raised more than $400 million in debt and equity. Even though it's been tucked away in the suburbs, working behind the scenes in a largely invisible business, ExteNet became one of Chicago's most promising tech companies, attracting more than $100 million from investors such as Soros. More important, it built on the region's traditional strengths in wireless and telecommunications infrastructure.

"It validates the Chicago area as being conducive to entrepreneurial activity," Manire said.

The company considered an IPO but decided against it. As demand for Internet access has continued to grow, with streaming video and other services taking off, there has been a flurry of transactions in the telecom-infrastructure business, particularly among companies that own and service cellular towers.

Ganzi sold Global Tower Partners in 2013 for $4.8 billion. Last year, Nokia Networks bought SAC Wireless, a Schaumburg-based company that installs wireless-networking equipment.

WIRELESS DEMAND

ExteNet's business has taken off with the explosion in wireless demand—with the company building networks both outdoors and indoors using distributed-antenna systems and small-cell technologies. The market is growing at more than 25 percent a year.

"It's there for taking," Manire said. "We've got a real healthy backlog right now. We just have to be smart about it."

But it's been a long road. Most venture funds have a five- to 10-year horizon for investment. ExteNet raised its first outside capital 11 years ago. It's similar to what happened with software firm Fieldglass, which sold to private-equity firm Madison Dearborn, allowing earlier investors to cash out, before the company sold to SAP for more than $1 billion.

Category: