Cradlepoint

“Just as wireless has become the dominant networking medium for consumers, we believed that cellular communication would become increasingly critical for enterprise edge networking needs,” said Ron Mika, Managing Director, Sorenson Capital. “The challenge was making high-performance wireless sufficiently easy, secure, and reliable in situations where there wasn’t a lot of technical expertise and experience on site. That’s what initially attracted us to Cradlepoint.”

Cradlepoint was a Boise, ID-based company that developed wireless solutions that combined edge router hardware, cloud-based network management software, and LTE and 5G cellular networks to provide companies and public sector organizations enterprise-grade wireless wide-area networks (WWANs). Cradlepoint WWANs are used to support retail stores, branch offices, mobile environments, large-scale IoT networks, and smart city environments.

“The key to Cradlepoint’s success was its ability to simplify deployment and management at the edge without sacrificing on enterprise WAN security, reliability, or performance requirements,” said Sorenson Capital Advisor LeGrand Lewis, who led the Cradlepoint investment for Sorenson Capital. “Cradlepoint figured out how to provide cloud-based network management so that customers’ dedicated IT and network experts could handle provisioning, customization, and the more complex enterprise network management activities in a centralized fashion. Nothing was required from on-site staff except to plug in the box. It was an industry game-changer.”

“When we decided to partner with Sorenson as an investor in 2015, we felt that they had the right combination of financial and industry expertise. What we came to appreciate as we worked with them was their willingness to help in every situation and under any circumstance. Sorenson was always available.”

Cradlepoint didn’t rely solely on product and technology innovation to grow their business, however. CEO George Mulhern and CFO Val Heusinkveld reasoned that moving to a subscription-based, all-inclusive licensing model would further differentiate Cradlepoint’s WAN solutions from those of their competitors. They believed that a subscription model would increase pricing transparency, simplify budgeting, and improve flexibility for customers, while contributing to better sales efficiency and a bigger addressable market for Cradlepoint.

“When George Mulhern and his team began to consider a move to a subscription model, we thought it was a great idea,” said Sorenson Capital’s LeGrand Lewis. “We had seen this type of pricing strategy work repeatedly in other industries and felt that Cradlepoint could reap similar benefits in terms of faster growth and improved financial results.” Sorenson actively supported the effort by working with the Cradlepoint team to define the financial and operational metrics they would need to monitor the progress of their new subscription-based business model.

Sorenson also helped Cradlepoint adopt techniques to effectively perform cohort and churn analysis, benchmark financial operations, and access capital that would be required to support their move from traditional, one-time equipment and software sales to subscription-based licensing.

“The Sorenson Capital team deeply understood subscription models. As we evaluated the change to a new business model, they immediately offered to help by sharing their expertise and experience,” said Cradlepoint CEO George Mulhern. “They dove right in to support me and the Cradlepoint team at both the strategic and tactical levels. They helped us avoid missteps, accelerate the transition, and minimize disruption to our ongoing business and customer relationships. It was invaluable to have Sorenson as a partner in this journey.”

Ron Mika said, “We were incredibly impressed with Cradlepoint’s leadership team’s ability to set a vision and follow through with precise execution. They defined a clear and well thought-out strategy to simplify every aspect of enterprise edge networks and delivered on what they promised. It was gratifying to watch and know we were a part of their success.”

Cradlepoint’s approach certainly paid off. The company built its customer roster to more than 20,000 enterprises and public sector organizations, including Starbucks, Walmart, State Farm, and Amazon. Revenue grew approximately 30% annually for several years in a row after Sorenson invested and exceeded $130m in 2019. Based on this strong performance, Ericsson acquired the company for $1.1 billion in November 2020 as a way to expand their presence in the 5G space.

“When we decided to partner with Sorenson as an investor in 2015, we felt that they had the right combination of financial and industry expertise. What we came to appreciate as we worked with them was their willingness to help in every situation and under any circumstance. Sorenson was always available,” said George Mulhern. “As a CEO of a fast-growing company in a dynamic market, it was a great feeling to know that we had such a high level of support from our investment partner.”