Five VC firms inject $225m in telecom startup(2)

Columbia Capital, M/C Venture Partners, Oak Investment Partners, Battery Ventures and Centennial Ventures have committed $225 million in Series A funding for Zayo Bandwidth, a fiber-based network operator.

US telecommunications company Zayo Bandwidth has received $225 million (€165 million) in Series A funding from a group of US venture firms including Columbia Capital, M/C Venture Partners, Oak Investment Partners, Battery Ventures and Centennial Ventures.

Based in Louisville, Colorado, Zayo was founded by Dan Caruso and John Scarano, both of whom previously worked for ICG Communications and Level 3 Communications. The company formally launched yesterday, but has been making acquisitions since May to built up its fiberoptics capacity, in response to increasing bandwidth demand nationwide.

This robust demand, along with the track record of the company’s founders, explains how Zayo was able to obtain such an unusually large amount of venture funding so soon after its launch, said Centennial managing director Rand Lewis.

“Demand has just grown steadily since the mid-1990s,” Lewis said. “We think the companies we’re investing in are well positioned to take advantage of that.”

Telcom is a popular sector among venture capitalists and buyout firms alike. Recent deals include TPG’s and Silver Lake Partners’ $8.2 billion acquisition of US company Avaya as well as Goldman Sachs’ and TPG’s $27.5 billion buyout of US regional wireless carrier Alltel.

Interest in internet-related businesses in particular is picking up. Accel Partners, Atlas Venture and Advent Venture Partners were joined by Google in the $25 million funding round of Ubiquisys, a 3G mobile access provider last month. UK buyout firm ECI also bought underground wireless networking company Avitec for rival portfolio company Aerial in a deal valued at £24 million ($48 million, €35 million).