One of the broadband stimulus grant rules is that recipients must match at least 20 percent of the total awarded by the National Telecommunications & Information Administration (NTIA). The rationale is to keep companies from using free money to expand, only to abandon a project later if it proves a money-loser. But not all operators have 20 percent of millions on hand.
Not to worry. At least one investment bank, JANCO Partners, is pairing service providers with private equity and venture capital investors willing to fund the 20 percent. There are caveats to the match-making – for one thing, operators must be prepared to cede some control to their new financial partners, said JANCO Partners Managing Director Ray Hernandez.
“The funds will want to be control investors but some will consider being minority investors with strong minority rights,” he explained in a Q&A this week with xchange. “And because they’re financial investors, they have a time horizon, expectations for some type of a liquidity event, usually in four to seven years. Like most funds, they want oversight over management and voting rights on extraordinary events. So there are a lot of the same types of controls that you see in traditional venture capital and private equity investing.”
Hernandez also said there’s a lot applicants should do now to better position themselves for a grant.
“I would urge applicants to reach out to their legislators at both the state and federal levels because it is a political process. I think good plans have a better chance of getting grants than plans that aren’t as compelling. And what’s compelling for the federal government is two things: putting people to work and providing high-speed Internet access for people that traditionally have not had access to that.
“But there’s also a political element to it and all other things being equal, if an applicant has support for their project at the state and federal levels, you have a good chance.”
Click here to read the entire Q&A with Hernandez.
