Stargate Industries

The

Beginnings and early history

Stargate Industries was initially founded in November 1994, named after the

In January 1998, Stargate secured financing from local investment firm RRZ Capital Markets and acquired its largest local competitor USA Onramp, Inc.^[1] Stargate relocated its headquarters and USA Onramp's staff and operations into newly remodeled office space in Pittsburgh's Strip District neighborhood the following May. The acquisition roughly doubled Stargate's count of residential customers to 17,500, added a large portfolio of business customers, and also doubled its work force to roughly 50 people. The acquisition of USA Onramp also expanded Stargate's service footprint further into southwestern Pennsylvania and also provided its first presence outside of Pennsylvania, in Wheeling, West Virginia.

Prior to the acquisition of USA Onramp, Stargate purchased several servers from

The latter half of 1998 also saw Stargate acquire the domain name "stargate.net", and shortly thereafter begin using that domain for their website and all future marketing campaigns. In October, Stargate acquired the customers of Washington PA Online, a small Internet Service provider in Washington, Pennsylvania.

1999 was a year of rapid growth and several acquisitions for Stargate. After securing a $15 million line of credit from

It was also during this time that Stargate and other local Internet Service Providers began lobbying officials in the City of Pittsburgh to include an open-access provision in the city's cable television franchise agreement with AT&T Cable Services (later acquired by Comcast), to allow providers other than AT&T Cable Services and @Home to offer Internet access to local cable customers.^[10] The franchise agreement was ultimately renewed with open-access provisions. Stargate later began offering cable Internet service in northwestern Pennsylvania through a partnership with Coaxial Cable TV (later acquired by Armstrong).

As was the case in the broader economy, 2000 was a year of significant growth and change for Stargate. The company crossed the 80,000 customer threshold in January. $20 million of additional funding was secured from

Despite the challenges in the wake of the dot-com crash, the company continued to grow. In early 2002, Stargate secured an additional $2.5 million in equity funding from Alta Communications, bringing Alta's total investment in Stargate to around $13 million.^[17] In May, Stargate topped a nationwide list of the 100 fastest-growing inner-city technology companies compiled by

Later in 2002, Stargate opted to move to a self-funded business model, where expenses were funded solely from incoming revenue, rather than taking on additional debt, since the company still had positive cash flow. All aspects of the company's operations were examined to find areas where costs could be minimized or eliminated without impacting service.

Bankruptcy

While revenue began to rebound in late 2002 and into 2003, the combination of several factors forced Stargate to file for protection under

• The economic recession caused many businesses to reduce IT expenditures, such as Internet services. This caused many customers to switch services to lower-cost providers.
• Business customers did not adopt the
  Application Service Provider
  model to the extent that Stargate had hoped they would.
• The acquisition of CIScorp ultimately proved not to be as good of a fit to Stargate's service portfolio as was originally expected. The economic recession of the early 2000s also hurt the professional services business as customers scaled back or cancelled consulting and professional services contracts.
• Stargate needed to keep a significant amount of money in reserve in case litigation that was pending against CIScorp prior to its acquisition by Stargate was not resolved in Stargate's favor, potentially requiring Stargate to pay to settle the suits.[21]
• The inability to re-negotiate several expensive contracts with communications carriers and other vendors saddled the company with unfavorable operating costs as the economy floundered.
• The inability to restructure the terms of several of their
  dot-com crash. This also halted talks of a merger with an unnamed provider similar in size to Stargate ^[22]
• Moving to a self-funded business model while cash-flow positive allowed Stargate to fund ongoing operations, but impacted the amount of money available to fund
  capital expenditures
  to purchase new equipment or make upgrades.