Flyover country for the world's electrons
How Lighthouse Communications lit up the community with broadband and helped retire the modem dial tones
As America listened to the famous modem tones for the daily dopamine dose from “You’ve got mail”, three friends in Des Moines recognized the increasing interest in higher-speed access to the Internet. As sales technologists at Beacon Microcenter, they cleared their interest to pursue broadband from their employer and a side gig was born. Since that day in 1996, entrepreneurs Matt McGuire, Shannon Godwin, and Jay Devers capitalized on Internet access and brought Lighthouse Communications to Central Iowa and expanded it beyond the city across flyover country.
The three assumed roles closely suited to their skill - Matt the business planner and designer, Shannon the sales guru, and Jay, the operations wiz. They began learning (fast!) the telecom business model and obtained their first office in Governor Square in West Des Moines. Despite little collateral and even lesser experience, they obtained a SBA loan and generated enough interest for two engineers to join them in the sparse office. And began working.
A mere two blocks away I was hunting for fast internet and found a like-minded friend in Jay. An interview with Jay helped me remember and chronicle our adventures of growing businesses first in parallel serving the central Iowa market, then in widely different trajectories.
A bit of telecom history
Public access to the Internet began in earnest at the start of the 1990s. Compuserve and America Online replaced the thousands of bulletin board systems that had served hyperlocal interest groups and communities. Forward thinking businesses, on the other hand, were searching for something that could serve the entire offices. Like many today withholding AI assistants and flexible work arrangements, some were content keeping the Internet away from employees lest they fritter work time like petulant children (I suppose I am allowed to show my cards here).
In contrast to today’s gigabit connections, the popular methods for small office access then were 56Kbps Frame Relay connections or 128Kbps ISDN connections (18000x slower than today) yet ran against two forces - lack of sufficient bandwidth to the global networks, and a lack of recognition by many businesses of the Internet’s power. Lighthouse persevered and brought entrepreneurial fervor to a highly regulated industry. They forged relationships with engineers inside telecom companies to continually build and expand the network. Their engineering teams ensured that customers received the highest levels of care (observed and experienced by my team multiple times throughout our relationship.
As the Lighthouse sales and technical teams “wore out their shoes (and welcome)” running all over town, Lighthouse’s initial customers, Farner Bocken, Bankers Trust, Associated Computer Systems and many more, found reasons to adopt the Internet mechanisms as the fax machines and AOL accounts moved into supply closets and out the door.
Growth…
“We were green in the gills, hungry and scrappy” — Jay Devers
Late 1996, however, exposed a near-fatal outcome of growth - the SBA loan was dwindling daily and the guys had “about a month” of operating capital at the burn rate at that time. With a whole new level of motivation, the team found themselves creating marketing collateral, sometimes reediting pamphlets by night based on what resonated with customers that day. They’d built a brand and market so, naturally, potential investors took note and invested. The late John Pappajohn and his fund, Equity Dynamics, saw the growth prospects, and became one of the early investors. The Iowa Farm Bureau Federation, captained by David Lyons and Dave Sengpiel soon followed as one of the early investors.
As the business grew, the team and their network operations moved from West Des Moines to the Financial Center. The move downtown was a big step forward, and many a late-night planning session ensued. These sessions, at the office ping-pong table gave way to even later consumption of bacon quesadillas at the downtown Marriott sports bar. This work-hard play-hard culture was a big factor in recruiting investor dollars and the next wave of talent into the company.
It is about this time where I’d become close to Nate Olson-Daniel, Lighthouse’s networking wizard who would teach me everything I know about TCP/IP (the Internet’s language) and DNS (the Internet’s White and Yellow pages). It turns out that even graduate level studies in these theories didn’t prepare me for what Lighthouse’s team was learning and deploying in the field.
The growth capital allowed the team to expand Lighthouse’s reach to nearby markets of Omaha, Minneapolis and Kansas City in a manic push for new business subscriber accounts. Fast growth and fast speed, sadly, can cause fatal crashes. As the dotcom boom took hold, Lighthouse ran into “a growth wall”, where capital expense outpaces revenue growth and investors begin to worry about the growth ceiling.
Investors began planning changes to the management team and company structure. The founding entrepreneurs, recognizing their baby had grown admirably under their care but they were no longer in full control, began planning their exit. Matt was the first to depart, followed a few months later by Jay, and finally Shannon, still out selling new business until his last day on the job.
New day
The new owners christened the company as LightEdge Solutions in 2004 with new CEO Jim Masterson. The scrappy dreamers and founders had created a company whose impacts are visible in the modern data center in Altoona and higher bandwidth, fast networks throughout the region. Broadband had created a world of managed services that has evolved into what we all know now as cloud computing services. The Anschutz Corporation foresaw this and took over, bringing scaled industry expertise, connections, and money in return for a controlling interest.
The national proliferation of broadband providers of the 1990s found fever pitch in the mid-2000s and rollups were inevitable and came fast. Life almost came full circle in 2007 when one such rollup presented Jay’s new employer an opportunity to buy LightEdge as a part of a business services portfolio addition. Jay’s board ultimately decided to pass on LightEdge to acquire a different opportunity, instead acquiring Seattle-based Speakeasy for $97MM. Jay used what he calls his “tuition expense” from the Lighthouse experience as business-lead on the Speakeasy acquisition.
Diaspora
Entrepreneurial growth amongst innovation driven enterprises comes when successes of one business led to multiple employees and original founders to reinvest their proceeds into new ventures. The network effect caused by this reinvestment is observable via successful companies’ diaspora like the ones we observed from Microware Systems, even as it feels premature to think of diaspora when the connections established by Lighthouse decades and years ago still carry Internet traffic through the city.
Matt has taken his knowledge of building high-speed networks and data centers and invested time and money in building a new entity to mine and store digital currencies.
Shannon, the consummate marketing and sales professional, continues the Internet’s reach and value proposition into businesses through his new business, Websolutions Omaha.
Jay is back home, for him, in in Kansas City, an early-on Lighthouse hub, running Bestway International, an international logistics service provider, shifting from moving bits to physical goods. Bestway has enjoyed 10x growth to grown to 40+ employees and continues to serve a global footprint, including Matt’s company.
The land of data centers
Thirty years ago, Des Moines was a broadband desert relative to coastal markets. We were unable to attract the attention of Covad, Rhythms, or even Qwest (our local telco, pre-Centurylink) for investment in larger, fatter pipes capable of carrying traffic. Absent national investment, dreamers like the Lighthouse trio, DWX and Drew Wadell, and numerous other names no longer in my contact list (but I hope those who remember post the names in comments) lit up the region. Public and private investors committed their political and financial capital which now enable the giant data centers doting our landscape.
Final nuggets of wisdom
Jay wishes he’d known the VC world better and how deal terms can be fruitful or fatal to young entrepreneurs. We spoke of the emotional attachment natural in a founding team and how timely detachment is so necessary to help the business grow. He acknowledges the value a mentor or advisor would have made him 2nd guess some of the decisions, during the frenzy of bubbles and bust. These founders were committed to their vision, to their own detriment at times.
Jay’s memory of this market is pleasant as it is built around a supportive and collaborative community. A community where it was fun expanding broadband into the city, meeting cool people, getting hands dirty, and building something of lasting value. As it relates to Lighthouse/LightEdge, there are just a handful of regrets, not many. Ultimately, Jay is super proud of helping create so many jobs and opportunities for the hard workers to earn good pay working for the company, attain financial independence and security for their families, all as the city became stopping ground for bits around the world over these thirty years.
Though Lighthouse’s story has disappeared, some say shamefully, from the current company’s website and local media, I hope this little marker remembers the outsized impact three sales engineers who foresaw our high-bandwidth world at a computer retailer had on Central Iowa and beyond.
A different version of flyover country for electrons flying at light-speed
Conversation with Jay Devers, Feb 13, 2024
Des Moines City Council Communication No. 01-240
1997 Des Moines Register Article from the founders’ personal archive
Thanks for this, Tej. Fascinating.