Starry to go public with FirstMark in deal valued at $1.66B

Starry, a Boston-based fixed wireless broadband provider, is going public with FirstMark Horizon Acquisition Corp. (FMAC) in a business combination valued at $1.66 billion.

It marks a big turning point for Starry, which was founded in 2014 by Chet Kanojia, who was also the force behind Aereo, a startup that tried to upend the online video business. Starry is using 802.11 technology to disrupt the home broadband space, going up against cable companies and increasingly, wireless carriers. Starry charges $50 per month for internet service. 

FMAC is a special purpose acquisition company (SPAC) sponsored by an affiliate of FirstMark Capital, a long-time investor in Starry whose portfolio also includes Airbnb, Shopify and Pinterest. 

The transaction will give Starry $452 million in cash on the balance sheet, including $130 million from an equity round that includes ArrowMark Partners, Atreides Management, Fidelity Management & Research Company, Tiger Global Management and affiliates of FirstMark Capital.

“The whole set-up was great for us” in the sense of maximum cash to the balance sheet, long-term alignment and a partner with experience helping companies go through this stage, according to Kanojia, who will remain CEO after the deal closes.

When Starry was rolling out its network in late 2018 and early 2019, it was focused on multi-family dwellings because that’s where the economics were most attractive and it had not yet built out a single-family product, Kanojia told Fierce. It started growing dramatically after that; it acquired licensed spectrum in the 24 GHz auction and saw a 187% increase in revenue from 2019 to 2020.

“Now we’re at a point where we feel the next stage is to start expanding into multiple cities at the same time,” he said. “Access to capital is what we were really trying to solve for.”

So far, Starry has deployed its gigabit network in six U.S. cities: Boston, New York, Los Angeles, Washington, D.C., Denver and Columbus, Ohio. It covers more than 4.7 million households. It aims to cover more than 25 million households by 2026, with a projected 1.4 million subscribers and $1.1 billion in revenue.

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Starry uses 37/24 GHz spectrum and IEEE-based technology. While mmWave technology (above 24 GHz) has a reputation for costing more to deploy than low-band spectrum, that hasn’t been the case for Starry because it uses the 802-based technology.

The company designed its own network hardware, including base stations, home receivers and Wi-Fi routers. It also boasts its own software billing, customer care and network management systems.

Starry, which now employs about 725 people, had been raising incremental amounts of capital commensurate with the kind of progress it was making. Now the next big milestone is two and a half or three years away, and that entails reaching the EBITDA break-even point, Kanojia said.

“This, we thought, was a mechanism where we had a great partner identified. This was a mechanism that could get us the right amount of capital at the right cost structure,” he said. “We feel like we’re at the beginning part of this process and well-situated to take advantage” of changes in the market.

The transaction is expected to close in the first quarter of 2022. The combined company will continue to operate as Starry and will be listed on a national exchange under the ticker symbol “STRY.”