VETRO raises $1M as investors bet on growing demand for broadband services

(Editor’s Note: VETRO ended up raising $2.5 million this round. I’ve left the article as originally reported, though.)

VETRO Inc., the Portland-based developer of cloud-based broadband mapping and fiber management software for the telecommunications industry, has raised more than $1 million despite the economic upheaval caused by COVID-19.

The company, which was a 2019 Maine Startup to Watch, had been in the process of raising capital when the outbreak of COVID-19 put a temporary damper on investor interest. However, the company was able to pull together an inside-led round in March despite the crisis as investors realized the company’s software platform, called VETRO FiberMap, stood to benefit from the increased demand in broadband Internet services caused by the crisis, Will Mitchell, the company’s CEO, said in an interview with Maine Startups Insider. 

“The investors realize that the business is well positioned to succeed in the uncertain times ahead because of our market,” Mitchell said. “Never has connectivity infrastructure been more critical. The need for fast, reliable, affordable internet connections at every home and business in the country is now headline news. VETRO’s customers are the ISPs building modern fiber networks to meet this need.”

The round closed on April 24, but VETRO is leaving the round open for an additional 60 days as it’s still in the process of raising an additional $500,000, Mitchell said.

VETRO will use the fresh capital to invest in the software platform and continue adding capabilities that small and mid-market internet service providers (ISPs) need to plan, design, and operate their fiber network infrastructure.

Counting this new round, the company has now raised a bit more than $3 million since its first seed round in 2017.

corporate restructuring

The company also used the opportunity to restructure, transitioning from an LLC to a C Corp and formally changing its name from NBT Solutions LLC to VETRO Inc.

“This conversion to a C Corp. was an investor-focused administrative maneuver, but also symbolic of the total transition to VETRO, the product company,” Mitchell said.

Before developing VETRO FiberMap as a SaaS product, NBT Solutions was an industry-agnostic GIS mapping firm that built mapping solutions for clients. Getting tired of always chasing new clients and building things from scratch, the company pivoted in 2014, diverting development resources to creating a cloud-based mapping software platform specifically for ISPs to help them actively manage and expand their fiber networks. In 2015, they unveiled VETRO FiberMap at a tradeshow in Texas.

While the big players like Verizon and AT&T have the resources for custom enterprise solutions, the company now known as VETRO targeted the small- and medium-sized ISPs that are investing in regional fiber networks, especially in suburban and rural areas. Some early users of the VETRO FiberMap product were GWI in Biddeford and Pioneer Broadband in Houlton.

product market fit

In the past few years, the company has demonstrated significant traction in its market. It has doubled revenue in each of the past two years and now serves fiber network operators in 35 states and 18 countries, according to Mitchell. It currently employs 27 people.

“We are adding new customers to this count every month,” Mitchell said. “Inbound interest in the form of prospective customers inquiring about the platform was up 500% last year, and 2020 is keeping that solid pace.”

seed capital tax credit also a catalyst

Another factor that generated the critical mass needed to close this first portion of the investment was the increase in tax credits available to investors in early-stage Maine companies through the Maine Seed Capital Tax Credit program. Included in the state’s supplemental budget, which the governor signed into law in late March, the tax credit program’s annual cap increased from $5 million, which was entirely claimed on the first business day of the year, to $15 million. The additional $10 million provided for deployment in 2020 became available on April 1 for investments made after that date.

“This benefit helps de-risk the investment in these uncertain times. It is an important program for us and for companies like ours raising capital to build business in Maine,” Mitchell said.

new and existing investors help close round

Maine Venture Fund (MVF), a quasi-state venture capital fund that was an early investor in the company, led this new round.

“MVF is proud to support this great Maine company facilitating connectivity for all, especially at a time when it is needed more than ever,” said John Burns, MVF’s managing director. 

A new investor is York IE, a New Hampshire-based venture capital fund, which made a “significant” investment, according to Mitchell. 

“Global demand for internet bandwidth is increasing at a rapid rate,” said Kyle York, CEO of York IE. “Households, businesses, and application providers are demanding better and faster broadband service. Unfortunately, the legacy tools Communication Service Providers currently utilize are closed, complex, costly, and cumbersome. VETRO FiberMap will change this. This combination of market opportunity, an experienced leadership team of industry operators, and the fact that we love working with companies in cities like Portland, Maine, made it an easy decision for us to invest in VETRO FiberMap.”

York IE has been keeping an eye on Portland’s startup scene, having also recently invested in Defendify, a local cybersecurity startup. Mitchell said Kyle York will undertake an active advisory role as VETRO begins to scale.

Portland-based CEI Ventures Inc. and the Maine Technology Institute, both early backers of what was then NBT Solutions, have also upped their investments. 

“VETRO’s products are helping to build better connected and more resilient economies, often in rural or underserved areas, which aligns with CEI Ventures’ mission and values,” said Chandler Jones, principal at CEI Ventures. “We are delighted to the support VETRO in this financing as management has done an excellent job to position to the company during these turbulent times.”

Brian Whitney, president of MTI, added: “We were pleased to be able to participate in this equity round with VETRO. Their performance over the last year, great performance YTD and their dedication to growing jobs in Maine are all in alignment with what a successful company can be. We look forward to continuing to support their continued success.”

IMPACT OF covid-19

Like every small business, Mitchell had to take a hard look at VETRO’s financials and make some adjustments to model for a potential dramatic downturn. The company’s 27 employees are also now working from home, but given the product is already cloud-based, that process was pretty “seamless,” Mitchell said. All in all, he said the crisis hasn’t materially changed the company’s strategy.

“No one is immune from an economic shift of this magnitude, and no one has a perfect crystal ball on what lies ahead. That said, after some initial pulling back it appears that our market is adjusting and will be surging in the medium term,” Mitchell said. “With schools going online, work being distributed, health and safety requiring connections, and even social life moving to the internet, there is going to be urgency in building out connectivity where it is lacking, and in upgrading where it is marginal or overtaxed.”