How the public sector can benefit from private investments

The story of Zayo and a "virtuous circle"

Every investor is looking for a positive return, but the best investments yield results even beyond the balance sheet. The idea of a virtuous circle of business says that every party involved – from the investors to the customers to the community – benefits in some way. Such is the story of Boulder-based Zayo, and the virtuous circle fueled by a team of seasoned executives and investors that have taken an idea for broadband networking and created prosperity farther afield.

If a circle can have a starting point, it may be found around 2007, when Dan Caruso and a team of entrepreneurs created a company now named Zayo that was designed to meet the ever-increasing needs for bandwidth. Mobile communications, streaming media, telemedicine, immersive gaming – all of these technological advancements require pipelines over which data can flow freely and quickly. To meet these needs, Zayo has built an incredible network of 7.7 million fiber miles.

In the nine years since its founding, Zayo has become a $1.5 billion revenue leader in global communications infrastructure, which includes the high-performance network that now reaches 350 markets in 37 countries, 57 data centers in North America and Europe and cloud and managed infrastructure services. Today, Zayo employs more than 3,000 associates, with 600 located in Colorado – a number that’s doubled over the past couple of years.

This type of growth might be surprising to some, but not to Zayo’s early investors who saw the potential for the company — and the community. One of its early backers was Colorado-based Centennial Ventures which counts the Public Employees’ Retirement Association of Colorado (PERA) as one of its largest investors. As a fiduciary for its members, PERA is obligated to invest $43 billion in trust fund assets wherever it believes it can generate the greatest return while managing risk. Colorado statutes also allow for preferential consideration of Colorado investments under sound investment policy. Zayo was one of those Colorado-based opportunities where PERA was able to meet its dual goals of serving its members while also investing in the state.

PERA invested $6 million in venture capital firms who in turn invested in Zayo. PERA’s initial investment returned more than 10 times that amount to the PERA trusts, and these returns were reinvested to support the retirements of Colorado’s public employees. Such a high return is welcome although not common and PERA’s diversified portfolio seeks to earn strong returns over many decades.

In 2014, Zayo had its Initial Public Offering and proved to be the largest single return of value from a Colorado-based company to Centennial Ventures in the 35-year history of the investment firm.

This virtuous circle touches more than just its investors and benefits more than the retirement savings of more than 500,000 of Colorado’s current and former public employees. Since its founding, Zayo has made investments in the community by supporting organizations that support education and diversity. Through their work with Greenhouse Scholars, Zayo is helping to provide mentorship and support to disadvantaged college students. The company also supports Denver School of Science & Technology, a public charter school.

Zayo is an example of the hundreds of innovative Colorado technology companies created through early-stage venture capital and supported through maturation by the local investment community. It also illustrates a virtuous cycle of investing: from public pension funds to private venture firms to emerging technology companies that create enormous value for all concerned, including employees, customers, investors and the community.

High-paying Colorado jobs are created, and the ecosystem of high-growth technology companies attracts other tech companies. These companies and their employees give back to their community in a myriad of ways, shaping the state’s next generation of leaders.

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