Charleston-based Skywaves Corp secures seed money to capitalize on 3G expansion

Charleston-based SkyWaves Corp. has secured half a million dollars in the last several months to design and build third generation networks in the mobile wireless industry.

“This seed capital will enable us to begin production,” says SkyWaves CEO Ron Konersmann. “At the same time, we’re working on a million dollar deal for our first round of funding that will help us cover all the orders that have already been placed.”

Technologies are converging to create so-called third generation (3G) mobile services, which combine high-speed voice functionality with data transmission capability over a wireless phone. Though 3G mobile services became available in Japan and Europe in 2001, American wireless companies like Verizon, AT&T and Sprint are just now launching 3G services in the United States. SkyWaves has been founded to assist with the development of necessary infrastructure to support 3G wireless in the U.S.

In the early stages, the technology will allow users to access the web, check their e-mail and play games in addition to making phone calls. As the technology increases in sophistication, nearly any broadband data transaction will be able to be conducted over a wireless phone. Such data transactions might include downloading music or movies, making purchases or video conferencing.

The technology is expected to revolutionize both work and personal life. Says SkyWaves President Jim Phillips, “Your phone will become a personal purchasing device. You’ll program a number or they’ll scan a number on your phone and your purchase will be billed to your cell phone. I think this will be available within the next five years; it’s being tested right now in Europe.”

In its North Charleston plant, SkyWaves manufactures shelters found at the base of wireless towers. The structures house the computer and radio equipment needed to enable wireless communication and must be designed to withstand the elements. In addition to building the structures for wireless providers, SkyWaves installs and configures client-owned equipment in the shelter.

Currently, the U.S. has approximately 150,000 cell towers to support wireless services. Because 3G requires at least five times the number of cell sites as typical wireless applications, cell site construction will increase dramatically in the next several years. Additionally, existing towers must be reconfigured to 3G standards.

Phillips says that Sprint’s recent launch of their Vision product is the first true 3G launch in the U.S. despite earlier “3G light” offerings by other providers. “As a result, carriers like Cingular, Nextel, and Verizon are really gearing up to build out their 3G infrastructure,” explains Phillips.

In light of the current slump in both the American economy and the telecommunications industry at large, securing funding has been a challenging process for SkyWaves. “We’re not where we were a few years ago, when you could just go to an investor or an institution and say, ‘I’ll tell you what I’m doing with the money later’ and they would say, ‘please take my money, I want to get rich,’” says Don DeLuca of D. DeLuca & Associates, a local organization that helped SkyWaves obtain its initial seed money.

“Our strategy has been much more detailed than it would have been a few years ago,” agrees Konersmann. “We are providing investors with very specific information to justify the incremental additional dollars we need and minimize the risk for investors.”

According to DeLuca, in addition to a cautious national venture capital environment, there is a local issue to address. “Charleston lacks a solid venture capital community,” he explains. “We have capital here, but there is no formal process in place for companies trying to obtain funds.”

But even in difficult times in a difficult market, a creative approach from the SkyWaves team and local Charleston investors has helped this venture get off the ground.

DeLuca emphasizes the importance of SkyWaves’ business plan in the process of obtaining local funds. “They have a solid business plan, they have a solid management team in place, there’s a market for what they want to do, and it’s commercially viable. It also works in their favor that the technology is continually becoming obsolete, so the towers need to be continually reconfigured,” he says.

“It also helps that our management team has a great deal of experience in this business,” adds Konersmann. “We’re unlike a typical start-up in that this isn’t a new concept we’re presenting to investors.”

However, SkyWaves initial success in winning over Charleston investors on an informal relationship forged with The Citadel. In this case, the initial seed capital was raised from Citadel alumni.

“By choosing to invest in the SkyWaves project,” says DeLuca, “Citadel alumni are helping their school, helping their community, and making money themselves. We’re creating a win-win situation here.”

DeLuca is passionate about the need for the private sector and the education sector to partner in the effort to bring new opportunity to Charleston. “I think if we could develop more relationships like the one we’ve begun with The Citadel, we could make some real progress,” he says. “I’m passionate about this because right now, Charleston is exporting our most important resource: Kids are graduating and leaving because they can’t find decent-paying jobs.”

SkyWaves is up and running thanks to their solid credentials and their ties with the Charleston education community. “The bottom line is that if you present the right story, investors will still invest,” says Konersmann.