At any given moment during the business day, 5 million virtual meetings take place throughout the U.S. on platforms like Zoom or GoToMeeting. About a fifth of users call in with their phones instead of connecting over the internet.
When they do, a fraction of a penny goes to an under-the-radar Raleigh tech company called Bandwidth, which has amassed a nationwide Voice over Internet Protocol network of 70 million phone numbers, including the ones used by major virtual conference companies.
Before the coronavirus pandemic transformed open offices into viral vectors, just 7 percent of Americans worked from home. By the middle of April, however, 316 million people in 42 states were living under stay-at-home orders. Birthday parties and church services went virtual, as did staff meetings and sales pitches and business strategy sessions.
More people were virtually conferencing than ever before. And more people were dialing into those conferences than ever before.
All of a sudden, Bandwidth was making more money than ever before.
The 20-year-old company never imagined profiting from mass misery. But that’s what’s happening. Since the market crashed in late February, Bandwidth has seen its stock price nearly double. The company’s market cap today is more than $2.6 billion, more than six times its valuation when it went public in 2017.
“It’s humbling,” founder and CEO David Morken says in an interview over Google Meet (another Bandwidth client). The fit, youthful-looking 50-year-old—a self-described “Jesus freak” who says he frequently crawls under his desk to pray—is sitting alone in a conference room in Bandwidth’s Centennial Campus headquarters sipping an Arizona iced tea. “It’s gratifying to see the team rise up and achieve. It’s motivating us for the next step.”
When the world abruptly went remote two months ago, Bandwidth (and its shareholders) hit a morbid kind of jackpot. But it wasn’t blind luck. The company’s success is less a fluke than a byproduct of years of staying ahead of the curve—of spotting a need on the horizon and figuring out how to fill it.
More than anything, it’s the story of David Morken’s knack for being in the right place—and in the right niche—at the right time.
It began in a duplex in Park City, Utah.
Actually, it was a half-duplex. Morken’s parents lived on one side, while Morken, his pregnant wife, and their three young children lived on the other.
OK, really, it was a walk-in closet in a spare bedroom of a half-duplex, where Morken sealed himself off to make calls.
Five years earlier, in 1994, before the dot-com boom, Morken had registered the domain name bandwidth.com while studying law at Notre Dame. (As the original registrar, he paid nothing for it.) He’d read an article predicting that fiber-driven connectivity would herald a new age of economic growth. He wanted to be part of it.
After graduation, Morken joined the Marine Corps and served as a judge advocate in Hawaii before returning home in 1999. The first iteration of Bandwidth.com banked on its searchability. Businesses seeking higher-speed internet connections would land on Morken’s website, and he’d act as a middleman and connect them to services through the major telecom companies.
He was in the right place at the right time.
Bandwidth.com took off. Morken received more than 180 leads worth up to $2.2 million in the first month. Forbes took notice and profiled him, calling his registration of the domain name “visionary.”
Visionary or not, he wasn’t living a gilded life. He was hustling, maxing out credit cards, pulling all-nighters, and trying to close deals. It was exhausting. But after the Forbes article dropped that September, Morken caught his second lucky break.
It wasn’t the $1 million offer for the domain name (which he turned down) but a phone call from a North Carolina investor he’d never met. Henry Kaestner didn’t want to wrest control of Bandwidth.com from Morken. Instead, he offered to build the thing—whatever it was—together.
By 2001, Morken had relocated his family to North Carolina to take Kaestner up on his offer.
By then, the dot-com bubble had burst, and the Triangle’s tech landscape was nearly nonexistent.
“When we got here, it was like nuclear winter,” Morken says. “The fallout from the dot-com burst meant there weren’t many companies in our peer group, and there wasn’t any significant institutional capital. Investors didn’t really exist here.”
Bandwidth.com had no big investors to please. It had three employees and bankrolled itself with the money it made. Meanwhile, the bankrupted dot-com giants had invested billions in fiber-optic networks that were ripe for the picking. By 2003, Bandwidth.com had transitioned from middleman to direct sales, buying abandoned bandwidth in bulk from carriers and reselling it on the corporate marketplace.
“We had the last-mover advantage,” Morken said in a 2019 Business NC profile. “The forest fire burns and this little green shoot pops up.”
The next big shift came in 2007, as Silicon Valley turned its attention to integrating high-speed internet and voice software. Bandwidth.com partnered with Google, powering what would become Google Voice while building out its own network.
This was a company of a dozen employees competing in an emerging field against AT&T and Verizon. But Bandwidth.com had an edge the major telecoms didn’t, Morken believes.
“We were using software; they were using hardware,” he says. “We were using the internet; they were focused on the last 100 years. We were an agile software platform on top of an IP network; they were working in the past.”
That momentum helped the company survive the 2008 economic crash, though not unscathed. Morken laid off 26 employees, a fifth of the company at the time.
As the economy recovered, Bandwidth.com expanded. Its first major investor, the Charlotte-based Carmichael Partners, came aboard in 2011. Over the following decade, the company steadily grew to more than 500 employees and amassed a massive VoIP network that included 911 providers and nationwide phone numbers.
In September 2017, in anticipation of an initial public offering, Bandwidth.com became, simply, Bandwidth. Two months later, valued at $400 million, the company went public, its shares selling on Nasdaq for about $20, with Google, Microsoft, Skype, and every major video conferencing platform in its client roster. In 2018, Bandwidth earned more than $200 million in revenue. By mid-2019, its market cap exceeded $2 billion. The company was, Morken said at the time, a “20-year overnight success.”
Then came the coronavirus. Calls over the voice network spiked 30 percent overall in March, with meeting-solutions clients like Zoom increasing usage by as much as 66 percent, according to Bandwidth’s VP of investor relations, Sarah Walas.
On Monday, Bandwidth closed at $111.97 a share.
Last weekend, the VoIP network Morken built serviced a more personal connection. With his daughter’s wedding plans canceled due to bans on gatherings, Morken moved the wedding to his backyard in Chapel Hill and streamed the service to would-be guests through one of his virtual conferencing platform partners. (He wouldn’t say which, so as not to incite jealousy.)
This, perhaps, offers a hint at the future as VoIP progresses beyond the world of business and into our homes and places of worship.
“The line has blurred for a lot of our customers,” Morken says. “There’s a mixture of personal and work uses of their platforms where there wasn’t before.”
The next step involves a new 40-acre, $70 million Raleigh headquarters at Edwards Mill and Reedy Creek Roads that will more than double Bandwidth’s current 800-person workforce to about 2,000 employees, with salaries averaging close to six figures. The new HQ’s “beating heart” will be an on-site Montessori school, Morken says. There will also be a gym with a basketball court for employees’ optional 90-minute workout lunch breaks.
Morken, who now has six children, has also put his money into his adopted hometown. In 2009, he and Kaestner—who has since left Bandwidth to become a managing partner at Sovereign’s Capital, a faith-based venture capital company—founded DurhamCares, a nonprofit that seeks to mobilize Durham churches, more deeply connect residents to the city in which they live, and spark investment in the community.
“I believe each person is fearfully and wonderfully made in the image of the creator and because of that are priceless,” Morken says. “For me, that creator is the God of Abraham, Isaac, and Jacob and his son, Jesus Christ. And we are all called to be creative—to make stuff and do things for others that are not yet visible. This has been a great faith foundation in an inventive business.”
At Bandwidth, Morken preaches the gospel of work-life balance, including a mandatory phone embargo during vacations. He brings in corporate chaplains once a week—completely voluntary, the company says—and gives employees the option to exercise or read books to earn bonus days off. Friday was one such bonus day. Normally there would be about 100 people in the office—most employees are still working from home—but it was a ghost town.
When the Google Meet interview experienced sound problems, Morken bounded onto a table, determined to fix the speaker on the ceiling himself. After a few minutes—a lifetime of dead air during an interview—he decided on a better course. He moved to another conference room.
In an odd way, that brief interlude summed up who Morken is better than how he describes himself: driven, determined, someone who sees what he wants and goes after it, the guy who jumpstarts a business out of a closet in his parents’ duplex and turns it into an empire. But he’s also nimble, willing to make adjustments, to move his family across the country and start a new life in an unfamiliar place, to switch his business model from middleman to seller when the market presented an opportunity.
Combine that with a little luck and a lot of faith—the impulse to claim a domain name in 1994, the prescience to reject a $1 million offer to chase a bigger, unseen fish—and you can see how Bandwidth keeps finding itself in the right place at the right time, and how that has become one of the company’s defining traits.
Morken is still eyeing the horizon for what’s next. Bandwidth began an international expansion in 2019, purchasing budding networks in London and Frankfurt. Morken hopes the company’s next chapter “is a story that is printed in many different languages.”
But this chapter isn’t finished just yet. A world of Zoom meetings and Google Meet interviews and Skype calls will be with us for a while, Morken says. And as long as we crave connection in an era of social distancing—and as long as people keep using VoIP—fractions of pennies will keep getting added to Bandwidth’s bank account.
Contact Raleigh news editor Leigh Tauss at ltauss@indyweek.com.
DEAR READERS, WE NEED YOUR HELP NOW MORE THAN EVER. Support independent local journalism by joining the INDY Press Club today. Your contributions will keep our fearless watchdog reporting and essential arts and culture coverage viable in the Triangle, coronavirus be damned.
