Two investors turned about $6 million into roughly $985 million by claiming bits of sky
After a 1984 rule change, they filed for wireless licenses in person and stitched them into a paging company, then sold before cell phones took over.
Joys of Compounding · A.J. Rohde: Living in the (Software) Limelight [Joys of Compounding, Ep. 38]Carl Thoma, his wife, and his partners went to courthouses around the country to "apply for licenses for pieces of air," as A.J. Rohde, a senior partner at Thoma Bravo, put it.
The air was radio spectrum, the invisible frequencies that carry paging and phone signals. When spectrum was deregulated in 1984, a license for a slice of it in a local market could become the starting point for a wireless business.
That paperwork became a company called Pagenet. The group put about $6 million to $7 million into buying spectrum and starting the company, and the eventual return was roughly $985 million. It was the most successful deal in a long run of consolidation deals, and it was sold before cellular service and cell phones spread widely.
Thoma had started as a young employee at First Chicago Bank. Venture and buyout investing was barely an industry in the 1970s, but inside the bank were a couple of unconventional bankers interested in backing startups. One was Stan Goldberg, a banker, and Thoma was his mentee.
Thoma, a Stanford MBA who grew up in the panhandle of Oklahoma, brought a value investing mindset associated with Ben Graham and Warren Buffett: do not lose money. In 1980, he and Goldberg left the bank and created their own firm, Golder Thoma.
In 1982, that firm was credited at the time with pioneering the buy-and-build approach, what investors today call roll-ups. The idea was to find value by consolidating fragmented industries, pairing Goldberg's experience with Thoma's energy and reluctance to lose money.
The method was to raise a structured fund, pick a fragmented market, and find an outside executive to carry out the plan. The firm gave that manager just enough capital to buy assets, combine them, and bootstrap from there, while pushing for financial and operational excellence.
Pagenet followed that pattern. The partners assembled licenses, built the business largely by hand, found someone to run it, and pursued it aggressively. They continued to aggregate spectrum, financed by banks at the time with real equity behind it.
That deal then became the cornerstone for a strategy the firm applied for 20 years to very different businesses, including golf courses, newspapers, and funeral homes.
Questions people ask
What does it mean to own a piece of air?
Spectrum is the set of radio frequencies that carry wireless signals. A license is government permission to use one slice for a specific service in a specific place, like paging or mobile calls, and no one else can legally use that slice there.
What happened to Pagenet after they sold it?
Pagenet, formally the Paging Network, sold small beepers that displayed phone numbers and short messages. It grew huge in the late 1980s and 1990s, then declined as cell phones added cheap voice and texting, and it filed for bankruptcy protection in 2000.
Why did they have to go to courthouses instead of just calling?
In the 1980s, many licenses were awarded locally and required paper filings, public notices, and proof that you would serve the area. Showing up in person let small, motivated applicants claim overlooked markets before big phone companies moved in.