Lighthouse Communications of Warwick, among the fastest growing high-technology companies in Rhode Island – claiming to more than double its revenues from 1998 to 1999 — last week shut its doors, apparently because it ran out of money, several industry sources said. The closing comes at a time when high-technology companies are flourishing in Rhode Island. David Sylvestre, the company’s marketing director, confirmed last week that “technically the company is closed.
“The run rate with senior level technical people is very high,” he said, making it difficult for the company to meet its “month to month demands.” That, he said, in spite of the company posting more than $5 million in revenues in 1999, a jump of nearly 180 percent from 1998 revenues of $1.8 million.
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Sylvestre would not comment on the specific reasons for the closing, on 2000 revenues, on the method by which the company intends to dissolve, what contracts the company had and what will become of them, and where its 12 employees would eventually land.
The company’s president, Kevin DeLange, would not come to the telephone but through Sylvestre said he would have no comment.
The closing, Sylvestre confirmed, comes within weeks of the company’s being awarded a contract from OSHEAN (Ocean State Higher Education, Economic development and Administrative Network) to establish a network operations center to monitor the OSHEAN network. Sylvestre would not comment on the size of the contract, but said it was basically a monthly service fee.
He did not know whether the contract had even been signed, and speculated that since several companies bid on the contract OSHEAN would award the work to another of the bidders.
The closing of the five-year-old company comes at a time when high technology companies in Rhode Island are beginning to attract substantial venture capital money, and are aggressively competing with the Boston market for top level employees.
Sources locally suggest the company may have been able to raise substantial money a year ago, but held out for a bigger payday that never came. Recent efforts to attract venture capital money failed, sources said, and the company found itself with too few customers to support high-end salaries and an expensive infrastructure.
”They ran out of gas,” one source said.
In the Providence Business News Book of Lists, published at the end of 1999, Lighthouse Communications was ranked as the fastest growing high-technology company in the area. Lighthouse, which had offices at 250 Centreville Road in Warwick, was also listed as the fastest growing company overall in Rhode Island.
What happened in the interim seems somewhat a mystery, although sources within the industry suggest this was a company that was founded by “engineers, techies,” but really had no one with top management skills.
Some sources suggested that one new employee who came over in the last few months, made efforts to find venture capital funds, but couldn’t deliver.
”They needed someone who could manage the place,” sources agreed, suggesting that the company’s demise should be a lesson to similar companies founded by those with technical skills, but little management background.
The lack of a management team and lack of proprietary products made the company unattractive for investment, sources suggested.
The company listed its business as “managed network services.” But funding a “network operating center,” sources said, requires “no trivial costs.” The company’s search for customers came up well short of the 10 to 20 it needed to support its infrastructure, source said.
The demise of Lighthouse is part of what may happen in an industry that saw a meteoric rise of many information technology companies that had the technical skills, but not the management or sales teams, sources said.
”You’re going to see a lot of dot coms crash and burn,” a source said. “You’re already seeing e-tailers crash and burn.”
