TelcoDR and its subsidiary Skyvera have spent the past several years scooping up unwanted telco software assets, marking their 10th acquisition earlier this month with a roughly $6.7 million deal to buy American Virtual Cloud Technologies. And several more could be on the way. Danielle Royston, TelcoDR’s CEO, told Silverlinings she expects 2023 to be a busy year thanks in part to sudden shortfall of venture capital dollars.
“I’ve been hearing from founders and owners that capital was flowing pretty freely a couple of years ago and then it just completely shut off,” she said, noting this trend began before the recent collapse of Silicon Valley Bank. “If you got caught at the point where you weren’t generating profit – we are seeing fire sales for that…In the last two months, I’ve seen a ton of people talking and approaching me.”
Royston said she’d like for Skyvera to do as many deals as possible in 2023 while the market conditions are in its favor, but noted it is constrained by operational capabilities. That is, it doesn’t want to acquire more companies than it can successfully integrate and turn around.
For those unfamiliar, TelcoDR – along with Skyvera and its other subsidiary Totogi – has a fairly unique business model. TelcoDR, through Skyvera, scopes out and buys aging and unprofitable telco software assets. Skyvera absorbs the acquired assets and is charged with making them profitable again within a certain timeframe by evaluating and refining their headcount, products and pricing.
What’s old is new again – in the cloud
Sometimes – but not always – the companies that Skyvera buys have software that Totogi can repurpose as it works to build a shiny new cloud-native telco stack.
For example, Royston pointed to the mobile messaging assets Skyvera picked up with its purchase of NewNet. This software was built to be run in an on-premises core, but Royston told Silverlinings exclusively that Totogi has spent the past year rebuilding the software to run on the public cloud. A test version of the new software is currently available for Totogi customers and Royston said she thinks a commercial offering will be ready perhaps by the end of Q2 or in Q3.
While it might seem like this arrangement means Totogi will cannibalize Skyvera’s business, Royston said that isn’t the case. Skyvera will continue to run the legacy businesses and provide existing offerings to customers who aren’t ready to make the leap to the cloud. But for those who are ready, Royston said Totogi’s similar but cloud-native offerings are a perfect jumping off point.
Because of this model, which allows Skyvera to profit off legacy businesses and Totogi to grab and cloudify the tidbits it needs for its telco stack, Royston said she’s an ideal buyer for anyone out there “who is thinking of selling old and busted” telco software.
Furtive funding
While Royston was happy to lift the curtain on TelcoDR’s business structure, she remained mum about where exactly it’s getting the money to fund Skyvera’s acquisitions.
Back in 2021, TelcoDR announced it had $1 billion in backing to fuel its operation and kicked off its spending spree by investing $100 million in Totogi. But Royston has never disclosed who is providing the cash beyond stating it came from a “group of investors.”
With a laugh, Royston told Silverlinings there has been wild speculation about her mystery partners. Among others, guesses have named the U.S. government, “the Saudis” and Amazon Web Services. LightReading and others posited the money is being supplied by ESW Capital and its billionaire founder Joe Liemandt, citing the latter’s ties to Royston through her work at his company Trilogy.
But while Royston acknowledged Liemandt has long been one of her mentors and is someone with whom she maintains close contact, she also noted “I’m married to a guy I met at Trilogy. So.”
Eventually, Royston said she thinks the names of her investors will be disclosed, whether that happens when she buys a publicly traded company or a portfolio company files for an initial public offering. But for now, she reiterated what she’s always said: They don’t want to be the story.
The problem with mysteries, though, is everyone wants to solve them.
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