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Left: Jerry Howe, co-founder, president and COO of Gabriel Communications

Middle: Robert Brooks, co-founder and chairman, Gabriel Communications

Right: David L. Solomon, CEO, Gabriel Communications

Brooks Spawns Telecom “Start-Ups”

By Kevin Kipp

Self-made telecom millionaire Bob Brooks has helped make St. Louis a hotbed for high-tech businesses.

A shift’s afoot in St. Louis.

Around the halfway mark of last century, the region’s business identity was tied to “booze & shoes,” and a reference to American League hierarchy.

This century we might update our motto to something like, “tech & tel, give ’em hell.”

Except it’s not hell when it’s the truth.

Two national publications recently touted the St. Louis region for its wealth of telecom entrepreneurs. Last May, Upstart magazine featured St. Louis for being a hotbed of savvy upstarts. And late last year, Red Herring magazine, a publication that focuses on “The Business of Technology,” selected local telecom icon Bob Brooks as 1999 top Ten Entrepreneur.

Internet investment guru Andy Rachleff believes that St. Louis is a national leader for Internet infrastructure, wired back office operations and entrepreneurs. His Benchmark Capital equity fund invests in ’Net, semiconductor and software opportunities.

In a speech in January in Washington, D.C., Rachleff described St. Louis (Okay. Denver, too) as America’s second city “for this type of business activity, just trailing AOL’s hometown…in Northern Virginia.”

Heady praise from a credible source, who also happened to recently invest $10 million in Core Express, a local, startup, Internet infrastructure company.

But if investment is the symptom, chalk up the source of the region’s venture capital magnetism to its talent pool, notably alumni of outfits like a couple of those founded by Brooks.

Start with Cencom, which he founded in 1981 with $300,000. Under his leadership as chairman and CEO, the firm pioneered the cable TV industry’s deployment of fiber-optic technology. Crown Media bought Cencom for $1 billion in 1991. Now it belongs to Charter Communications.

Above: Pete Zebrowksi, service technician at Gabriel, wire wraps the back of the DSX bay to establish new service to customers.

Next up was Brooks Fiber Properties, founded in 1993 with $41 million. Brooks led BFP as chair and CEO into 36 U.S. markets. MCI WorldCom bought it in 1998 for $3.2 billion.

According to Mike Hannon, general partner at the $15 billion Chase Capital Partners in New York, “There are a lot of well regarded managers coming out of Brooks Fiber Properties who have formed several CLECs.”

And, Hannon points out, those CLECs [competitive local exchange carrier; pronounced: See’-leck] with St. Louis roots are popping up on both coasts.

“The hardest thing to find [in tech and telecom], he said, “is experienced management. Where firms have grown, it’s been because of the people. In St. Louis there’s a lot of entrepreneurial activity, because there’ve been a lot of successful firms there. Success breeds success.”

Time for one more! Brooks is now building his third communications enterprise: Gabriel Communications Inc., of which he is chairman.

That’s Gabriel, as in the archangel who announced – among other important messages from our Sponsor – that his Boss had selected Mary to be the Mother of Christ.

And though Brooks is a devout Catholic, his Gabriel focuses on marketing telecommunications: a full suite of local service, long-distance services and Internet services including high-speed access, e-mail services and web hosting services.

Brooks, an engineer by training, shares founder-hood with Jerry J. Howe, president and COO of Gabriel, who had been a senior vice president of finance at BFP.

“Six months after we sold to WorldCom, Jerry called to say he had a business plan and asked if he could get my thoughts” Brooks says in a telephone interview from his winter digs in Longboat Key, Fla. “I liked the plan, but thought he might be a little advanced on the technology for the time. But it was certainly a technology that had to come, and I said let’s talk to some money folks.”

Howe says, “When we first sat down, we figured we could raise $35 or $40 million. After a quick check, we found we could raise $50, and then a few other players said they thought we could raise $80 million.”

And that’s how snowballing got its name.

Early-on venture capital sponsors were Goldman, Sachs & Co., Chicago; J. H. Whitney & Co., Stamford, Conn.; Centennial Funds and Telecom Partners, both of Denver; One Liberty Ventures; Cambridge, Mass.; Norwest Equity Partners, Minneapolis; and Chase Capital Partners.

“We met them in groups in Boston and St. Louis,” Brooks says. “Of all the companies we talked to, only one turned us down, and that was because they were overextended.”

Brooks explained that three VPs from Brooks had started CLECs…in the Southeast, the Northeast and California, “and that ate up a lot of the available capital.”

That shortage boded well for Hannon and Chase Capital, who had not previously invested in a Brooks company.

“We came to the deal late,” Hannon says. “Bob had been doing work with the larger investors for some time. He’s loyal, and properly so; he went to his friends first. We were lucky to get into the deal for a small piece”: $5 million of Gabriel’s $80 million start-up stake.

“We’re new to the Bob Brooks investment circle,” Hannon says, “and quite happy to be there. I’ve told Bob and Jerry and everyone that the next time they go out for financing to count on us for a very large piece.”

Hannon says he would like to get his position in Gabriel up to at least $50 million. “I believe in the management team and the business plan,” he says.

And both the business plan and the management team look to a new technology, something called “asynchronous transfer mode”. According to a press release from the company, ATM technology is far more efficient than the more common “circuit switched” architecture, which was developed for voice transmission. Today’s telecommunications consumer shoves all manner of other impulses—data, Internet, fax, video—“through the tube,” as well.

Those old circuit-switched networks carry just one kind of impulse at a time…even when it occupies barely a hair’s breath of bandwidth.

But what if you bundle up a batch of those transmissions—fax, e-mail, graphics, whatever mix you please—stuff them in a large electronic envelope, and send that through the tube? What if you could use more of the bandwidth all at once, instead of lining up each kind of transmission and sending it down the line (or fiber, as the case may be) in a queue?

A lot more digitized information could arrive simultaneously, that’s what. And on fewer lines, too.

This advantage, investors and Gabriel executives believe, makes them the right carrier for businesses that don’t want to, or can’t afford to, pay for extra lines in order to get faster access.

“Our real pay dirt is the small-to-medium business,” Howe says. “We add the most value when we go in and talk to [a company] with 12 or 20 people.

“The Internet is a whole new form of communications,” he continues. “It came on too quickly for people to be expected to understand their options the same way they know how to use fax machines and voice mail. Our sweet spot is when we help a client understand how best to employ his local and long-distance service, and especially the Internet, whether it’s the benefits of communicating by e-mail or using a web browser to interface with a strategic supplier who may have established an extranet.”

Typical customers (among some 600 as of January 2000) he says, might include “a local bank, small insurance agency, an electrical contractor, or a local law firm.”

Asked to name some in St. Louis, he did: Founders Bank (locations in Chesterfield and Glendale, $65 million in assets), Redel Insurance (Ballwin, five agents), Sachs Electric (Chesterfield, annual sales more than $100 million) and Berger Cohen Brandt Stokes (Clayton, six attorneys).

Above: Charles Castloo, central office technician at Gabriel, performs routine maintenance on the Nortel DMS 100, a central office switch that provides dial tone to customers.

With a touch of pride in her voice, Cherie Scheidegger, vice president at Founders, says, “We were their very first customer! They installed the whole phone system. They handle all our local and long-distance accounts at both locations.”

Congratulations to Gabriel’s Brian Beers, whom Scheidegger says was “very attentive. The customer service is just outstanding. Whenever there has been even a minor problem—a line went down for a couple hours at Glendale—they were right on top of it, finding out what the problem was and fixing it.”

Guy Brandt says his law firm gets their local, long distance and Internet service through Gabriel.

“E-mail is a must-have for sending documents to our clients,” he says, “editing right there with them, online. And doing a lot of research; we hook up with the Secretary of State’s offices to examine corporate records.”

Brandt says the firm’s “Internet capabilities are far better. There were a few glitches getting set up, but now everything seems to be working better than before.”

He worked with Gabriel’s Mitzi Jones and Ron Cook.

Ron Cook? Wait a minute. Isn’t he Gabriel’s marketing manager, the guy who sets up interviews with the company’s executive corps?

Cook: “Whether it’s in our job description or not, we’ll do what it takes to make certain the customer is satisfied.”

All-hands-on-deck service may also be a part of the entrepreneurial growth curve. Gabriel started up last year with a payroll of 15, primarily investor-execs, who collectively kicked in about $3 million to play.

Now the company employs more than 250. Some are techies. Some are suits. But all of them are potential investors, with options for stock that vest after three years.

“Bob likes everyone to have some skin in the game,” Howe says.

And how.

In January, Gabriel announced it had elected David L. Solomon as company vice chair and CEO, the latter a capacity vacated by Brooks. In the same press release, they announced that Meritage, a private equity fund Solomon had founded, would invest $12.5 million in Gabriel.

New technology, new money, old friends. Howe, Solomon and Brooks, along with a gaggle of other Gabriel brass had worked together at Brooks Fiber…some at Cencom as well.

In his five years as executive vice president and CFO at BFP, Solomon raised $1.5 billion in equity and debt facility.

“I relied heavily on David’s advice at Brooks Fiber,” Brooks says. “I believe he is extremely important to the future of Gabriel, but he was under a lock up [non-compete agreement] for 18 months after the sale to WorldCom.”

During his lock up, Solomon kept busy with projects ranging from raising $120 million in equity and $300 million in bank facility for Diginet (a competitive telecom provider to South American markets, and on whose board he sits) to working with Jack Tankersly (an investor in Cencom and BFP) and Salomon Smith Barney to raise $340 million from pensions, endowments and insurance companies to form Meritage.

Also he was a partner at KPMG Peat Marwick LLP where he says he helped take companies private, “among other duties.”

So floating around with that kind of money, why did it take so long to invest in Gabriel?

“When Gabriel was formed, Meritage hadn’t been fully formed,” Solomon says. “Now that that’s taken place, this was an opportunity for me to join the organization and complement it with an additional investment by Meritage. Everybody wins.”

Asked to outline Gabriel’s goals for the next 12 months, Solomon says, “Our first and never-ending goal is to have satisfied customers—not at parity with their current provider but far superior—and also provide them service that is significantly easier to use, because it’s a bundled product.

“If we don’t take care of this one first then our [growth] goals don’t matter much.”

Growth goals include going from serving “four or five markets to at least 14 markets. At that point we’ll have raised…[an] additional $150 million or more in equity and a commensurate amount in debt facility.”

Howe says Gabriel has offices operating in Kansas City and Springfield, Mo., Wichita, Kan., Oklahoma City and Tulsa, Okla., and Little Rock, Ark. For new markets, Gabriel has targeted Indianapolis, Ind., Lexington and Louisville, Ky., and Akron, Columbus, Dayton, and Cincinnati, Ohio.

Howe says Ohio offered a lot of “telecommunications opportunity,” because demand for advanced services is high, state regulations are favorable, and few other CLECs operate there.

“We focus on tier two and tier three cities. A lot of other telecommunications providers concentrate on the NFL cities, the top 26 markets or so. They establish a national presence that way, but they overlook these other communities.”

(We won’t tell the Chiefs, Colts or Bengals what you said, Jerry.)

Beyond opening those 14 markets, Solomon says one of the company’s goals is to have its own “national footprint, and look to some M&A [merger & acquisition] activity that broadens our geographic coverage and expands or complements our product offering.”

Solomon says prospective takeover targets include “organizations that could help us enter into datacentric services, such as ASP.”

(ASP: application service providers, for instance, offering software packages on-line.)

Solomon is optimistic about more than the future for Gabriel. “Bob’s track record is extraordinary,” he says, “but more importantly I’ve had the opportunity to work from the outset of BFP, and I know his management style. Of even greater importance is his integrity and his desire to grow people.”

More Solomon: “Bob provides people an opportunity to meet their potential. That’s what he did at Cencom, I saw it at Brooks Fiber, and he’s doing it here.”

Brooks explains, “They’re at the right age for the respect of their peers and they can handle the work. It’s gratifying to sit back and see them go, and it gives me the freedom to not tie myself down to a desk, and to be active in the Church.”

Active, indeed. Brooks studied for the permanent diaconate from 1991 until his ordination by Archbishop Justin Rigali in 1996. Rigali appointed him to serve Ascension parish in Chesterfield. And, Brooks says, the “Bishop of Venice also granted me faculties, and assigned me to Mary Star of the Sea parish here in Florida.”

There’s more: Brooks has chaired the Archdiocesan Development Appeal (sort of a Catholic United Way) twice; he helped established the Today and Tomorrow educational foundation for the archdiocese at the request of Archbishop John May; he chaired the foundation until Rigali asked him to co-chair (with Sansone Group’s Tony Sansone) Returning God’s Gifts, the archdiocese’s $66 million-plus capital campaign.

“I thought I was done with all that,” Brooks says about his high-profile Church work. “Then I got a call one day that the Holy Father was coming, and would I serve on that committee.”

He did.

For all his activities, Brooks says, “I don’t enjoy the day-to-day stuff. I’m more of the visionary. If you go back to all three companies, you’ll see that I organized them and served as CEO for 18 months. During that time I groomed a new CEO, so we had someone ready to pay attention to day-to-day details.”

Brooks also has a management philosophy regarding the rest of the employees.

“Everyone who works in a company I founded…delivery van or CEO…they’re all treated with equal respect and afforded the opportunity to participate in ownership of the companies,” Brooks says.

This approach “allows me to build a nucleus of talented young people who might not have an opportunity at either ownership or high-level management. This gives us the ability to get top-notch people in the future, because they’ve seen how well others have done financially and in their careers.

“You see the results in the sale of Brooks Fiber,” Brooks notes. “We had something like 30 people come out of that deal who, because of stock and options, had a net worth in excess of a million dollars.

“Gabriel,” he says, “has the potential to add to the financial strength of our employees.”

Kevin Kipp runs Bubble Communications, a creative services and community relations firm in St. Charles.



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Cover Story
Brooks Spawns Telecom Start-Ups
Patricia A. Nooney
Coldwell Banker Commercial American Spectrum

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Office Interior Roundup


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