StorageCraft Merger, UTOPIA, HAFB, and More (The Week of Feb. 22-26 in Review)

Top Biz news in Utah this week includes Draper-based StorageCraft merging; UTOPIA raising money; a 5G test-run at Hill Air Force Base; and five other news items. Week-in-review now published Fridays.

Feb 26, 2021

This week, two of the top companies in the data protection industry announced that they’re merging: StorageCraft of Draper and Arcserve of Eden Prairie, Minnesota.

The two firms provide a mixture of hardware / software products and services designed to help businesses and governmental entities recover from disasters (should they happen), and to prevent such disasters from happening in the first place.

Interestingly, most of StorageCraft’s clients have been based in the United States, with a definite bent toward the SMB side of the spectrum (small-to-medium-sized businesses). Conversely, Arcserve has been more focused on larger, enterprise-to-medium-sized entities, with much of its clientele based outside the U.S.

According to a story by CRN (a leading media property focused on technology distribution), the combination of the two firms will make it the world’s fifth largest data protection company behind

Dell EMC,
Veritas Technologies,
IBM, and
Commvault.

Of the two merging entities, Arcserve’s roots trace back to the founding of Cheyenne Software in 1983 as a data backup software company. Ten years later Cheyenne Software was acquired by Computer Associates who marketed it as Arcserve. Twenty some years after that, $6.5 billion private equity firm, Marlin Equity Partners, acquired the Arcserve product line from CA.

Conversely, StorageCraft was formed in 2003, and until 2016 there is no record of the company receiving any outside investments. But that year, $24 billion private equity firm TA Associates invested $187 million in StorageCraft.

And although the news release announcing this investment did not say so, I suspect that $187 million gave TA Associates control of the company, especially since concurrent with the investment a new CEO / Chairman was brought in to run StorageCraft.

So … why is this relevant?

The news release announcing the “merger” does not disclose any financial terms or conditions, which is not too surprising. Except that after the fact, Arcserve will be the name of the company, its CEO becomes the CEO of the combined firms, and StorageCraft will be described (at least initially) as “an Arcserve company.”

My best guess is that this is a behind-the-scenes private equity deal, with TA Associates selling its ownership stake in StorageCraft to Marlin Equity Partners, which in turn is folding StorageCraft into Arcserve.

Reduce overlapping overhead costs between the two firms, strengthen product/service offerings from one firm to the other (and their respective channel partners), and do so across global markets? Yeah, makes tons of sense.

And although most PE deals take 5—7 years for a follow-on exit/sale to maximize the Return On Investment (aka, ROI), with today’s red hot “blank check public offering” opportunities in play, I would NOT be surprised to see Marlin execute an Arcserve SPAC-merger in as little as 12—18 months.

Should be interesting to watch.

UTOPIA Raises $52.5MM to Continue to Build out its Network

UTOPIA (the Utah Telecommunication Open Infrastructure Agency) announced a week ago that it has raised an additional $52.5 million to continue to build out its fiber optic network throughout member cities in Utah and southern Idaho.

At its current pace, UTOPIA is currently laying nearly 45 miles of fiber optic cable per month.

As an Open Access network, UTOPIA designs and builds the network, and then different ISPs (Internet Service Providers) offer data, telecommunications, and internet connectivity to residential and business customers on top of the community-owned UTOPIA platform.

The UTOPIA network is currently available in 50 cities, and serves close to 130,000 residences, just under 20% of the residential market in Utah.

To be clear, UTOPIA has had a somewhat challenging history, with some individuals questioning whether or not governments should be in the infrastructure building business in the first place. {NOTE: When taken at face value this is an absurd complaint, otherwise we would have few roads, bridges, canals, etc., right?}

However, during its past 14 months, UTOPIA has raised nearly $115 million, and it claims to have the largest Open Access network in the country.

Hill Air Force Base to Serve as Test Pilot for 5G Telco Networks for the Department of Defense

The commercials / advertisements for 5G smartphones and cellular networks are all over broadcast network, satellite, cable and Internet channels.

And why not? The high-speed, broadband capabilities of 5G networks will make always-on, mind-boggling multimedia a reality for anyone using such systems.

Part of what makes 5G magic into a real thing is the fact that 5G networks and devices require dramatically more cell towers versus 4G networks.

How many more? Approximately 1 million 5G towers (or nodes) per square mile vs. roughly 6,500 4G towers per square mile. Yeah, yowza!

Unfortunately, each of these towers (and the smart devices connected to them), are actually radios. And the more radios in a given area, the more radio signals. And the more radio signals, the greater the likelihood of having the multiple signals colliding and overlapping with each other, creating interference in the process … until voila, the promised magic of 5G is wiped out.

To be clear, 5G networks are not just for civilians. In fact, governments around the globe have realized that the technological leaps provided by 5G networks make distant virtual warfighting very real and therefore, very appealing.

But if you and I run the risk of having communications problems with 5G systems, imagine the risk to America’s warfighters if their 5G networks were to crap-out during a battle. Yeah, people die.

So … this past week, Sunnyvale, California-based Kumu Networks announced it has been awarded a $5 million contract from the U.S. Department of Defense to design, build and deploy a “cutting edge” 5G testing and experimentation program at Hill Air Force Base.

A spinout of Stanford University, Kumu has raised over $50 million to develop next generation technologies that double the 5G bandwidth while reducing interference in a military environment, including one rich in ground, ground-to-air, air-to-ground, and air-to-air radar frequencies.

According to Kumu’s CEO, David Cutrer, the 5G credit card-sized radios Kumu have developed are optimized for real-time utilization and cancellation of what he termed “self-interference.”

Given its role as one of the main locations for the Air Force’s stealth fighters, it’s no surprise that HAFB has been selected by the DOD for what will be a three-phase Test Pilot program implemented over a 39-month window using Kumu’s new tech. Cool.

*An F-35A stealth fighter landing at Hill Air Force Base in 2015 (via Wikipedia)*

MWCN Names Packsize CEO and CoFounder its Entrepreneur of the Year

Shortly after our family moved back to Utah in late 1987, I connected with Bob Springmeyer of Bonneville Research, arguably the top rural economic development advisory firm in the Rocky Mountain region.

That connection not only led to a friendship with Bob that has lasted for over 30 years, but it also introduced me to the then-named MountainWest Venture Group, an emerging organization that became one of the most important and influential business-focused nonprofits in the State of Deseret.

I also ended up volunteering to help this nascent group, which led to me serving as an officer and director for over nine years of what is now known as the MountainWest Capital Network, including one year as its volunteer president.

For over 30 years the MWCN has selected a Utah-based business leader as its Entrepreneur of the Year, individuals so recognized for their business success and contribution to society.

This year’s MWCN Entrepreneur of the Year is Hanko Kiessner, CEO and Co-Founder of Packsize International, a global leader in what Hanko and Packsize define as Right-sized Packaging on Demand®.

Although raised in West Germany, Hanko attended the University of Utah where he earned both an MBA and his bachelor’s degree (in Business). He then returned to his native land for 10 years where he owned paper goods and corrugated board businesses. But nearly 20 years ago, Hanko returned to the State of Deseret with his Utah bride and their three children where he formed Packsize.

Today Packsize is a multinational technology company spanning 28 countries, and it develops, manufactures, supports, and sells a full spectrum of advanced packaging systems and automated machine technology.

Please check out the MWCN news release to learn more about its Entrepreneur of the Year program, Hanko Kiessner, and Packsize.

PurEnvironment Pleads Guilty to Making False Covid-19 Claims in the State of Washington

One of the most frustrating aspects of the still exploding growth of the Internet and the reality that virtually every organization and individual on the planet has become a publisher is this fact: the emergence of what some have named Fake News.

Unfortunately, the Covid-19 pandemic has seen some organizations and individuals try and take advantage of such capabilities by publishing and promoting false and misleading information.

Case in point, this past week saw one Utah company, PurEnvironment, plead guilty to criminal charges for what the Washington Attorney General stated were “False claims (that) undermine recommendations from public health experts and endanger the community.”

The news release from the AG’s office further stated that

“PurEnvironment knowingly persisted in their false assertions that their pesticide application provided protection against COVID-19.”

As noted in the release, the penalties attached to PurEnvironment’s guilty plea were fairly minor: Pay a $15,000 fine, one year of probation, and “come into compliance with state and federal regulations.”

So when I read the release, I was inclined to let it pass; “small potatoes,” I thought.

But then I discovered that as of noon today PurEnvironment is still falsely promoting that its treatment can Kill Coronavirus on its website: https://purenvironment.com/coronavirus-treatment/.

Perhaps this is merely an oversight; but my guess — it’s not.

P.S. Here’s a link to the original court filing against PurEnvironment and its owners.

Other News Items of Note from This Week

What follows below are three additional News Items of Note taken from the breaking news announcements that hit our radar this past week from Utah’s business community, news items we thought you might find worthwhile if not intriguing.

Case in point —

PG-based foreUP acquired by ClubEssentials

foreUP, the leader in cloud-based management software for public golf courses, has been acquired by Cincinnati-based ClubEssentials. Terms of the transaction were not disclosed, but with the acquisition of Pleasant Grove-based foreUP, ClubEssentials expects to aggressively pursue relationships with the over 3,000 public and private golf courses and clubs in the U.S. You can read the full details of the press release here.

Utah Named the Best State to be a University Student

Look out! Utah has come in at the top of another industry list. In this instance, it’s Gloucestershire, England-based Studee that has recognized that the state of Utah is the “Best State to be a Student in the USA in 2021.” The Studee-ranking considered such factors as

The number of 19- to 25-year-olds in the population;
Average salary;
Crime rates;
Happiness index scores;
Weather; and
The number of top universities in the state.

Congrats, Utah!

Savory Fund to Avoid "Ghost Kitchen" Opportunities

The February 4, 2021 issue of Deseret Business Watch was our first edition focused on a single company or topic, in this case the rapidly growing Quick Serve Restaurant chain, Swig. {NOTE: I hope you’ll give it a read if you haven’t done so already.}

Swig is a prominent portfolio company of Savory Fund within venture capital firm, Mercato Partners, and if Savory is not on your radar screen, it should be.

So when I stumbled across a comment on a LinkedIn Post from Andrew K. Smith (Savory’s Managing Partner), that the fund would not be going into the so-called Ghost Kitchen “segment now, or in the future,” I sat up and took notice.

*Screengrab from Feb. 19, 2021 from LinkedIn*

If you’re not familiar with the term Ghost Kitchen, GrubStreet.com’s Feb. 18, 2021 article “Ghost Kitchens Will Always Be Dumb” explains that they are

“… food-logistics operations … (that allow) “restaurateurs to experiment with new concepts (without having to build out and launch an entire restaurant)”

In other words, Ghost Kitchens are meals-to-go, prepared on-demand, and delivered and eaten anywhere, just not inside your own restaurant. Just provide them with your menu items, and Ghost Kitchens do the rest.

Some prognosticators have even gone so far to predict Ghost Kitchens could evolve into a $1 trillion market segment.

Sounds intriguing to me. But then again, I am not a restauranteur or a Managing Partner of a $100 million investment fund focused on the restaurant / food business.

So when Andrew wrote (in essence), “ain’t happening,” yeah, I took notice.

ICYMI: The “Five Utah Metros Recognized”

Consider this a postscript, but a week ago we took a deep-dive into the Milken Institute’s newly published Best-Performing Cities 2021 Report and the fact that the Report recognized five Utah cities for their strengths vs. hundreds of cities nationwide. If you haven’t read it yet, I hope you’ll check it out here: “Five Utah Metros Recognized.” Thanks.

Hashtags this week: #deseret #business #deseretbusinesswatch #utah #news #utahnews #utahbusiness #utahbusinessnews #disasterrecovery #merger #privateequity #fiberoptics #ISP #HAFB #DOD #airforce #USAirForce #5G #MWCN #entrepreneur #EntrepreneurOfTheYear #packaging #covid19 #washington #attorneygeneral #fakenews #guilty #pleading #food #restaurant #ghostkitchen

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