This Time, Tech Firm Resizing Upward

October 31

October 31st 2005

This time, tech firm resizing upward
Tracey Drury
Business First

From the October 31, 2005 print edition

A tour of Synacor’s downtown Buffalo offices is a bit like walking through one of the season’s corn maize attractions: Corridors wind around and bump into other offices and hallways in a rather confusing, dizzying manner.

The offices illustrate how the technology company has quickly added more office space several times to accommodate its growing workforce, nearly doubling from 40 employees to 71 in the past year while taking over the entire 15th floor’s 14,000 square feet at 50 Fountain Plaza. Plans call for expanding to larger space downtown next spring when the lease at the site expires in May.

“We’re using the closets now,” joked Ron Frankel, president of the company.

The situation is nearly the opposite of what happened a few years ago, when the company went through a different sort of resizing: Four years ago, the company moved from a 27,000-square-foot office suite in the Lafayette Court Building’s eighth floor to a 10,000-square-foot office on the seventh. Meanwhile, employment dropped from a high of about 100 in 2000 to about 35 in 2004.

But Frankel said the company is on a solid growth path now, with revenues climbing along with its workforce.
“The company is on a good trend and hopefully we’ll continue that,” he said. “We can’t see too far into the future but we’re very positive about it. We have a great big opportunity available.”

Synacor’s roots date to 1998 when the company was founded as Chek.com by three University at Buffalo graduates, offering branded e-mail. The company grew rapidly, and in 2001, merged with MyPersonal.com near San Francisco. The merger included $10 million in venture capital and a plan to shift the company’s focus.

Frankel joined the company shortly thereafter to lead the changes. An additional $6.5 million in venture capital came in spring 2003, followed by $1.25 million in additional funding in 2004. Today, the company’s software platform product, Portelus, handles back-office functions for Internet service providers (ISPs), cable companies and telecommunications companies, providing users with one sign-in for all premium services and applications.
“There’s been on the Internet side, sort of a bubble but the Internet kept growing throughout,” Frankel said. “It took a few years to sort of catch up. We were one of the lucky few survivors who made it through the down period.”

The key to that survival was focusing on serving ISPs and giving them the ability to provide a wide range of premium services and utilize a technology platform the company had built over the years. Synacor’s first provider was signed in August 2003 and the company has continued to add others since then, including United Online, Earthlink, Adelphia and dozens of other providers.

“We saw the growth and opportunity and said, ‘okay, maybe the Internet is going to grow just like cable television, where you buy your access service and you’ll also get a wide range of services or channels from which to choose’,” Frankel said. “We set out to integrate a wide range of services and did that. It turns out there is some demand for it — significant demand — and we’ve grown it from there.”

The company now provides bundled premium service packages with such providers as Major League Baseball, CNN, Encyclopedia Brittanica and dozens of other sports, news, education and lifestyle fee-based services available individually online — one of the largest catalogs of subscription service providers available from one source. Its ISP network includes more than 5 million broadband subscribers

“Our market is a large market,” Frankel said. “There are about 40 million broadband subscribers in the U.S., and 70 million cable households. If you think broadly, the cost of access to consumers is going to go down over time. How do you enable ISPs to keep their price up? One of the ways is to fill it with value-added services.”

Synacor is now looking to expand its territory outside of the U.S. to reach an even larger market.

In a September 2004 business profile, OneSource CorpTech reported Synacor’s annual sales at $3.3 million. Frankel, who declined to discuss specific revenues, disputes the number and said the company had 2004 revenues of “tens of millions,” a fivefold increase over the previous year, and is profitable. More growth is expected in 2006. Though it maintains a small office in California with about half a dozen employees, future growth will take place in Western New York.

“We have reasonable term contracts with our customers. We’ll see some significant growth,” Frankel said. “We have a great group, a bunch of really smart people. We’ve found some great tech folks here in Western New York and as long as we can continue to find local people, we’ll continue to grow locally.”