Genius in Boldness

What does it mean to be the First to See the Light?

When Financier Ted Forstmann was seeking a partner to spin-off Next Level Communications from General Instrument, he turned to Spencer Trask to unearth and polish its underlying value. The result was one of the most successful venture deals of all time.

As a small division of a much larger company, Next Level’s vast potential was not easy to see. But when the Spencer Trask team probed beneath the surface, we found a company with a unique ability to dramatically expand the bandwidth capacity of ordinary copper telephone wires. Using its VDSL technology, Next Level enables telecommunication companies to greatly expand their services to subscribers, without having to significantly upgrade their existing infrastructures.

Unlocking Next Level’s underlying value required bold action. Despite the company’s technical strengths, it lacked strategic focus, faced daunting lawsuits, and was rapidly loosing valuable talent. Spencer Trask dug in hard to address these crucial issues, built a cohesive management team and board of directors, then guided Next Level to the IPO market with CS First Boston., Merrill Lynch, UBS, and Lehman Brothers.

Hard Work and smart risk-taking paid off, elevating Next level from relative obscurity to industry leader in a short time. Twenty-six months after the initial investment, the company’s peak price market value topped $18 billion, a 440-to-1 return on investment (subject to a lockup). This performance rivaled e-Bay’s return in a 26 moth timeframe, which Business Week1 called “one of the best venture capital investments ever.” Motorola saw value and purchased in 2003.

“We are now in partnership with the same same fine firm that was a key investor in CIENA, in a structure giving GI shareholders and NLC employees very significant upside.”

Edward D. Breen, former Chairman and CEO of General Instruments

 

1 Business Week, February 15, 1998

Leave Comment

Your email address will not be published. Required fields are marked *