Starry was riding high about six months ago when it made its debut on the New York Stock Exchange (NYSE), but today it laid off about half its workforce and it’s no longer expanding into new markets.
The total number of Starry employees laid off is 508, and they were notified at 9 a.m. Eastern time today, according to a company spokesperson. The reduction was made across all of Starry’s markets and divisions, including corporate/administrative, sales, marketing, engineering, manufacturing and construction roles.
“It’s a pretty difficult day for all of us emotionally,” said Starry CEO Chet Kanojia, acknowledging that Starry’s third-quarter results were good. The company added a record 10,347 customers in the quarter.
But it can’t sustain that kind of growth at its current cash burn rate. “The reality is the overall broader capital markets just shut down,” progressively getting worse since the start of the year, he told Fierce.
While Starry’s value proposition is highly resonant with consumers, “we do need the money,” he said. “Extending our runway to be able to give us the time to sort of consummate something which allows us to have the capital base is really what’s driving this.”
Starry is sort of unique in that the customer demand is validated; it offers a “blazing fast” internet service for $50/month. “The demand has gone up, but the capital markets are just shut and not just for Starry,” he said.
Boston-based Starry launched service in 2016 with the intention of disrupting the cable industry and offering internet services using fixed wireless access (FWA) technology. Specifically, it uses IEEE 802.11-based technology and millimeter wave (mmWave) spectrum at 24 and 37 GHz. Since its launch, T-Mobile and Verizon have launched aggressive FWA offers, but Kanojia said cable remains its main competitor in the six markets where it operates.
In a press release, Kanojia said they needed to curtail their cash burn “while we pursue strategic options.” He declined to elaborate on exactly what those options are, other than to say it’s about raising capital and suggested more information on that might be coming next week.
Cash burn rate
It’s no secret the company has been in need of capital. The company’s cash balance stood at $100 million at the end of the second quarter, and it has recently been burning cash at a rate of about $50 million per quarter, wrote Wall Street analyst Craig Moffett of MoffettNathanson in a September 27 report for investors.
The analyst firm figured Starry will have to raise a total of $600 million over the next three years and perhaps $1 billon over the next five. “We continue to believe that Starry delivers a good product, and that it can generate good unit economics and long-term profitability,” Moffett wrote at the time. “But none of that matters right now. Investors are likely to remain on the sidelines until after the financing issue has been resolved.”
Starry provided partial third-quarter 2022 results today, saying that it ended the quarter with 91,297 customers, a 66% year-over-year increase. The customer base grew across all six of its markets. As of the end of the third quarter, homes serviceable were 5.96 million, an increase of 18% year over year. Starry attributed the increase to network improvements and expansion in existing markets.
But it's a tough day for the company all around. Starry tends to attract very mission-driven people and its culture is very mission-driven, so “when you have to tell a colleague who believes in the mission and is committed to it that unfortunately, we’re not in a financial place to continue to have them on the staff, it’s a very sad day,” Kanojia said.
Some of Starry’s employees could have chosen better jobs economically speaking, but they chose to work at Starry because they believe in the mission. “They came to us because they believe in what we are doing, and that’s the part that hurts the most,” he said.
The FCC disclosed last week that Starry was defaulting on its Rural Digital Opportunity Fund (RDOF) commitments. Kanojia said a lot has changed since those funds were offered two years ago, including a greater degree of inflation that was not factored in. In addition, there are competing subsidy programs from states and Starry decided that given its own capital needs that financing additional territories “is just tough,” he said.
For now, Starry is focused on dense urban areas where multi-family dwellings or apartment complexes tend to dominate over single-family homes.
“We’re going to hunker down, find the capital and then get back to it,” he said. “We’re going to continue to be that competitor that’s going to drive change in the market.”