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Boston Internet startup Starry going public via SPAC

Wireless service is offered in six cities, including Boston.

“When we set out to build this business, we wanted to transform how broadband networks were built," says Starry CEO Chet Kanojia.
“When we set out to build this business, we wanted to transform how broadband networks were built," says Starry CEO Chet Kanojia.Courtesy Starry

Wireless Internet service company Starry is the latest Boston startup seeking to go public by merging with a blank check company.

Starry, founded in 2014, said on Thursday that it planned to list on the New York Stock Exchange or Nasdaq by merging with FirstMark Horizon Acquisition, a special purpose acquisition company. The deal values Starry at $1.66 billion.

Unlike typical Internet connections that run over wires owned by cable or telephone companies, Starry’s service uses wireless technology to connect homes and businesses to the Internet. The company said it has 48,000 subscribers and offers service in six cities: Boston, New York, Los Angeles, Washington D.C., Denver, and Columbus, Ohio. Revenue nearly tripled last year, to $13 million.

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“When we set out to build this business, we wanted to transform how broadband networks were built so that we could meaningfully improve people’s lives with faster, better, more affordable internet access,” Chet Kanojia, cofounder and CEO of Starry, said in a statement.

Starry relies on high-frequency airwave bands known as millimeter waves to connect its customers to the Internet. A number of startups tried and failed to build businesses using the same airwaves to offer service in the 1990s, but Starry says the routers and other equipment it relies on are far cheaper and more capable.

Developing all its own hardware was “stuff that startups have no business doing,” Kanojia said in a recent interview before the deal was announced. But after “grinding away on the tech for a few years,” Starry is “really fortunate” to have cracked the problem, he said.

After the merger and a related private investment are completed, Starry will have about $450 million in cash to continue expanding. That’s more than double the $200 million the company had previously raised.

“Capital has been a major hinderance — they haven’t had the resources to scale as quickly as they would have liked,” telecom analyst Jonathan Chaplin at New Street Research said. The new money from the SPAC deal “could be just what they need.”

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The service starts at $50 for 200 megabits-per-second speeds, fast enough to watch streaming video in 4K or download a high-definition movie file in a few minutes. Starry also participates in government subsidy programs to bring Internet service to low-income households and has a free offering available in some Boston public housing complexes.

As is common with SPAC mergers, Starry offered a rosy forecast of its next five years of growth. By 2026, Starry projected it would have 1.4 million subscribers and $1.1 billion of revenue, generating $211 million of free cash flow.

Starry’s decision to merge with a blank check company instead of following the more typical startup path of selling new shares in an initial public offering offers a speedier path to going public.

But a growing chorus of critics also warn that SPAC mergers may not undergo the same scrutiny as IPOs and allow companies like Starry to make optimistic forecasts that may not pan out. On Wednesday, an investment firm called Scorpion Capital issued a report hammering Ginkgo Bioworks for forecasts in its SPAC merger and said it was shorting the stock. And in June, Hindenburg Research issued a similar report criticizing DraftKings’ 2020 SPAC merger.

Once Starry’s merger is completed, which is expected in the first quarter of 2022, Starry will trade under the ticker symbol STRY.

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Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.