Rocket Fiber LLC, the Detroit-based broadband internet provider born during a resurgent time for the city, will sell its assets to Cleveland company Everstream Solutions LLC, Crain's has learned.

Founded in 2014 with financial backing from Detroit billionaire Dan Gilbert — who has held the company in his Rock family of companies since that time — Rocket Fiber now becomes one of the first homegrown companies to spin out of the Gilbert sphere of influence.

The deal — set to close this spring — marks a major technology exit in Detroit's burgeoning startup community and brings a new fiber provider in Everstream to Southeast Michigan. It also comes amid a flurry of dealmaking in the internet infrastructure and telecommunications space, as companies like Rocket Fiber sell at double-digit multiples.

Terms of the deal were not disclosed. The Rocket Fiber executives said the company is profitable and that annual revenue is "well into" the eight figures.

The acquisition of Rocket Fiber gives Everstream access to the Detroit company's 41 route miles of fiber network in the downtown Detroit area and provides Southeast Michigan clients a direct connection to Everstream's existing fiber network around the Midwest.

Edi Demaj, Rocket Fiber's co-founder and COO, hopes the sale serves as an example for other Detroit-area entrepreneurs, as well as for the region's investment community.

"The hope is that others look at this (deal) and go, 'Hey, these guys did it, we can do it also,'" Demaj said.

"This is a sign that the ecosystem has arrived. It's another sign that we've matured," Marc Hudson, another Rocket Fiber co-founder and the company's CEO, said of the exit.

The move toward the Everstream deal began about six months ago, the founders said. At that time the company began exploring options to expand the company, which could have included heading to the capital markets, seeking out new partnerships or a sale of the company.

Ultimately, that process led to Everstream being the natural fit to buy the company, Hudson said, noting that he believes Rocket Fiber, in its hometown Detroit market, has "out-competed" bigger players like Comcast and AT&T.

"And we expect that to continue with Everstream," he said. "So it's just going to be additional services, additional value-add to our existing clients as well ... a lot of new clients who are going to be joining the new Everstream banner in getting those same high-touch, white-glove services that were known for providing, but under a brand and under a team that has network not only here in Detroit, but throughout the entire Midwest."

Following a 60-day closing period, all of Rocket Fiber's roughly 70 employees will become employees of Everstream, a company that has been growing throughout the Midwest in recent years, both organically and by acquisition.

Everstream President and CEO Brett Lindsey said that the Rocket Fiber branding will remain in place for existing residential projects in downtown Detroit, but that enterprise and commercial projects will be absorbed into Everstream's branding.

Everstream plans to complete ongoing Rocket Fiber expansion projects, such as a $2 million, 15-year project with Grosse Pointe schools. Lindsey said that Everstream, with its acquisition of Rocket Fiber, has more aggressive expansion plans around metro Detroit as well.

The three founders — Hudson, Demaj and CTO Randy Foster — will remain part of the company during an undefined transition period. However both Hudson and Demaj told Crain's they envision they'll be moving on to other projects in the near future, likely in the area.

"We're all in on Detroit," said Hudson, "and very excited to start something next here in the city."

While Gilbert's holding company Rock Ventures has divested certain assets, such as last year's $1 billion sale of the Detroit Greektown Casino-Hotel, the deal for Rocket Fiber marks one of the first companies to start from the ground up under the Gilbert umbrella and move to an exit.

A Gilbert spokesman says this has long been part of the businessman's goal with his various Detroit ventures.

"The Rock Family of Companies prides itself in supporting what is a very accessible and productive startup ecosystem the City of Detroit," Aaron Walker, chief communications officer at Rock Ventures, said in a statement. "It is amazing to see that Dan's initial vision and faith in three entrepreneurs has paid off in the form of Rocket Fiber creating game-changing digital infrastructure access that has helped power Detroit's tech and business scene."

Emily Heintz, the founder and managing partner of Ann Arbor-based entrepreneurial research organization EntryPoint, said the exit by Rocket Fiber's founders could likely have spinoff effects for the area's technology economy.

"Rocket Fiber's acquisition will make them one of the largest acquisitions of a telecom startup in Michigan's history," Heintz wrote in an email to Crain's. "What is exciting about this acquisition is the impact it will have on the Midwest. Entrepreneurs who are dedicated to growing the region and have successfully launched a company — on top of having national recognition and capital — are exactly the type of catalyst an evolving entrepreneurial ecosystem needs."

Flurry of deals

The telecommunications industry has seen a slew of dealmaking in recent years and multibillion-dollar deals have become the norm.

XO Communications LLC, a Virginia-based telecommunications company, was bought by Verizon Communications for $1.8 billion in 2018. Shareholders of Boulder, Colo.-based Zayo Group Holdings Inc. last year approved a merger of $14.3 billion with an affiliate of Digital Colony Partners and the EQT Infrastructure IV fund.

Those companies are much larger than Rocket Fiber, but Hudson said he believes Rocket Fiber "achieved a record exit multiple for a telecom company in the United States."

Raj Kothari, managing director at Southfield-based investment banking firm Cascade Partners LLC, said he has been seeing multiples for telecommunications companies like Rocket Fiber in the range of 13 to 20 times earnings before interest, taxes, depreciation and amortization.

"It's a pretty attractive market," Kothari said of the internet infrastructure space, where the two companies operate. "Fiber-optic companies are scarce assets, so they trade at premiums."

For Everstream, the push for organic growth and growth by acquisition stems from multiple drivers, according to CEO Lindsey. Among them are emerging technologies like 5G that require increased fiber, and a push toward more cloud storage, which also requires more fiber connectivity.

"Those ... things create about a decade of tailwind in our space," Lindsey said. "And so the investment in fiber is required to deliver on the promises of all of those things. And that's what's really pushed the valuations up in our specific sector."