In April 2000, I had a chance meeting with an old friend. My friend was starting up a new Internet service provider and wanted to know if I would be on the advisory board. What was going to make his new ISP different, he said, is that it would offer high-speed service in areas where cable and DSL were not available using unlicensed wireless equipment.
“What a coincidence,” I told him. “Vineyard.NET has been using unlicensed wireless equipment for nearly five years! You don’t want me on your advisory board—you want to hire me!”
In fact, he didn’t only want to hire me; he wanted to hire me, Eric, and the rest of the Vineyard.NET crew, and, while he was at it, he decided that he might as well buy Vineyard.NET.
My friend’s company was Broadband2Wireless (BB2W). The firm had more than $6 million in funding and was planning on closing a second round for $25 million or so by September 2000. Over the next few weeks we negotiated with him the purchase of Vineyard.NET by BB2W and guaranteed jobs for all of the Vineyard.NET employees.
Broadband2Wireless was a wild ride. Over the next three months the company grew from 3 employees to more than 60. Instead of planning a validating trial in one city, and then a careful build-out, we decided to launch in 6 cities by September 2000, then be in 20 cities by January 2001, and in 40 cities by January 2002. Why the rush? Because we were told that there was so much competition that if we didn’t quickly grab a huge amount of potential market share, we would be unable to raise future money. “Grow big or go home,” our venture capital financiers said.
Things did not go smoothly. One of the reasons was the change in the economy. In the spring of 2000, money was readily available—especially for big schemes that promised a huge return on investment from a billion-dollar market. But by the fall of 2000, the economy was cooling off: financiers were much more interested in sustainability than in unrestricted growth.
Amazingly, BB2W was able to close its second round of financing in the fall of 2000, with more than $20 million invested and a post-money valuation of more than $80 million. The company was elated. By the end of 2000, BB2W had an operational network in Boston, Miami, and Los Angeles, with an additional network deployed in New York and Atlanta.
Unfortunately, BB2W’s continued growth depended upon the ability to raise additional rounds of funding—and in this endeavor the company was not successful. The business climate had finally caught up with BB2W. Despite having a working network with customers, the company was unable to raise its third round of funding, and BB2W was forced to lay off all of its employees and declare bankruptcy in June of 2001. The company had both grown big and gone home.
As luck would have it, even though BB2W planned to dissolve Vineyard.NET and fold the Vineyard-based operations into the main company, BB2W’s staff never quite got around to the job. Vineyard.NET’s payroll had been transferred to BB2W, but the rest of the company’s contracts, business agreements, and long-term relationships remained otherwise intact. Vineyard.NET’s systems had been largely neglected by BB2W—after all, the company was more interested in building a nationwide ISP than in maintaining a dialup ISP on Martha’s Vineyard. Over the year, Vineyard.NET had lost a significant number of customers and one of its major resellers. So when BB2W declared bankruptcy, Vineyard.NET’s original founders approached the bankruptcy trustee with an offer to repurchase the company. The court asked the trustee to solicit offers from other ISPs and to advertise the sale on the Internet. But there were no other takers; apparently, few ISPs were interested in purchasing a dialup-only ISP with fewer than 1,400 customers, an ISP that was still located in my house. With no other offers, the trustee and the court approved the repurchase of Vineyard.NET by its original founders.
Thankfully, service for Vineyard.NET’s remaining subscribers was never disrupted.