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 Channel Futures

Business Models


ConnectWise Capital: $20 Million to “Incubate Innovation”

  • Written by Joe Panettieri 1
  • January 22, 2010
ConnectWise around January 25 is expected to launch ConnectWise Capital -- a $20 million initiative that seeks to "incubate innovation" across the IT channel. I've got a few dozen thoughts about the move, which will involve multiple companies. But let's start with the news...

ConnectWise Capital Incubate InnovationConnectWise around January 25 is expected to launch ConnectWise Capital — a $20 million initiative that seeks to “incubate innovation” across the IT channel. I’ve got a few dozen thoughts about the move, which will involve multiple companies. But let’s start with the news…

Sources say ConnectWise Capital will involve multiple companies that have pure channel sales models. The goal is to incubate new, innovative, channel-exclusive products and services for IT Nation — ConnectWise’s term for next-generation MSPs, VARs and solutions providers.

I’m still nailing down a few details, but I believe ConnectWise will allocate roughly $20 million of its own money to ConnectWise Capital. The effort does not involve external venture capitalists, and I don’t believe angel investors are involved. As part of the effort, it’s safe to expect the ConnectWise Capital business unit to build financial relationships with a range of technology companies.

How soon? I’d expect a few of the ConnectWise Capital relationships to be announced within the next few weeks. Frequent MSPmentor readers can guess the names, but I hesitate to share any here because I haven’t confirmed the details.

News of the ConnectWise Capital broke at a ConnectWise New England user group meeting, held today in Providence, Rhode Island. I think it’s safe to expect an initial, big-picture ConnectWise Capital announcement around January 25, followed by a series of individual company announcements within a few weeks.

What Triggered the Move?

In my opinion, I think multiple factors inspired the ConnectWise Capital business unit.

  • First, there’s a true motivation to assist and nurture technology companies that serve MSPs and VARs.
  • Second, I think ConnectWise sees the competitive technology landscape shifting — and the potential shift involves everyone from Dell to Kaseya to SaaS companies that sell direct to customers.

For now, I’ll cover ConnectWise’s goals to empower IT nation. And at 4:00 p.m. eastern today, I’ll be back with Here’s a blog that talks a bit about the potential competitive landscape involving ConnectWise, Kaseya, Dell and more.

Growing IT Nation?

Basic remote monitoring and ticket management is old news. Plus SaaS and cloud players are trying to sell direct to customers.

So what’s next for MSPs and solutions providers? ConnectWise Capital will seek to find the answers. Hardware as a service. Alternatives to Dell. Pure channel-based clouds that VARs and MSPs can leverage without worrying about direct sales conflict. I believe ConnectWise Capital will work with some key companies to help incubate those (and other) innovations. The resulting solutions, in turn, will be designed for MSPs and VARs to leverage.

Early Clues

ConnectWise Capital should not come as a shock. ConnectWise CEO Arnie Bellini offered some financial clues back in July 2009 during the Microsoft Worldwide Partner Conference (WPC). And in September 2009, Bellini essentially wrote an open letter to the industry, stating that ConnectWise was looking to invest in innovation.

Fast forward to the ConnectWise Partner Summit in November 2009, and CEO Bellini spoke about the “last mile” of IT. His thesis: VARs and solutions providers have long dominated their local business markets (the last mile of IT). But SaaS and cloud vendors could eventually invade that last mile, pressuring ill-equipped solutions providers.

I think ConnectWise Capital will strive to empower VARs and MSPs with new ways to either defend or redefine the last mile of IT.

Challenges Ahead

Still, I can’t ignore some key challenges. For starters, ConnectWise has a range of partnerships with hardware and software companies across the managed services ecosystem. The company will need to work hard to (A) maintain its existing partnerships, many of which depend on open APIs, even as (B) ConnectWise Capital strives to “incubate innovation” with some companies.

I’ll be back at 4:00 p.m. eastern today (or sooner…) to Now, here’s a blog discussing  the changing competitive software landscape a bit more.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Business Models Cloud Data Centers MSP 501 RMM/PSA Strategy

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15 comments

  1. Avatar Tim Brewer January 22, 2010 @ 11:08 pm
    Reply

    Hi Joe,

    We have just finished catching up with 140+ other ConnectWise Partners at the ANZ User Groups and have to say this strategic move by Arnie is a hit with the people on the ground *us*…..

    For years we have had the “Channel Selling Gurus” move us around to suit their latest whims and I respectfully suggest that they should start taking notice.

    The success that seems to be following ConnectWise has been done through building us, trusting us, training us, helping us, being honest with us and investing for us.

    I encourage others to watch and would love to hear in and outside of the user groups what is thought about this move and the relationship Integrity that ConnectWise appear to have with most of their partners.

    It’s “Truth it time” for the Channel selling Leaders
    – Does the Channel trust your leadership?
    – Does the Channel trust your words?
    – Does the Channel trust your commitments?
    – Does the Channel trust you to have our interests at heart?

    Please invest in us (the channel) not just use and then abuse….. Arnie thanks for having our back and trying to avoid us being blindsided again. Hopefully this might start a trend.

    Tim Brewer

  2. Avatar Joe Panettieri January 22, 2010 @ 11:37 pm
    Reply

    Tim: Thanks for the note. I hope all is well with you.

    I don’t want to blindly praise ConnectWise (or anyone else) in the MSP software space. But think of this:

    1. The most successful PSA and RMM vendors have executive leaders who (A) attend their own events and (B) meet constantly with their partner/customer bases. They hear first-hand from their partner/customer base, and execute on that feedback. That’s what these user/partner groups are all about.

    2. In stark contrast, I think a lot of large software and hardware companies have CEOs who spend considerable time with enterprise customers (CIOs) but not enough time with channel partners (VARs and MSPs). Many big tech companies are out of touch with their partner bases…

    -jp

  3. Avatar Huh? January 23, 2010 @ 11:51 am
    Reply

    Huh? ConnectWise is a 20-30 MM business tops that has been growing nicely for the past several years. Joe, it seems like you’re just a paid site for ConnectWise and Kaseya. Where are they getting this “20 MM”, it’s certainly not coming from their balance sheet. Even if their balance sheet had $20 MM on it (which there is no way because as a growing company they would use their money to build their business and reinvest and not leave it on their balance sheet to just grow in a money market – unless you’re saying that they are a 60 point net margin business which would put them in the “world class” category). Remeber Joe, they also have to pay taxes on those profits. If they had $20 MM on their balance sheet, they’d be a much bigger company.

    Sometimes your posts just crack me up, frankly.

  4. Avatar Joe Panettieri January 23, 2010 @ 12:09 pm
    Reply

    Huh: We welcome constructive criticism. I’ll be sure to ask ConnectWise where the $20 million is coming from as soon as ConnectWise Capital is announced. I think it’s safe to say ConnectWise Capital will involve multi-year engagements… not a $20M lump sum in 2010. But that’s just an educated guess on my part. As soon as firm details are announced I’ll ask.

    But keep the constructive criticism coming. I read all of it.
    -jp

  5. Avatar Griff H January 23, 2010 @ 5:06 pm
    Reply

    To Huh?:

    If the $20 MM didn’t come from ConnectWise’s balance sheet where did it come from, a Xerox machine? The $20 MM must have come from their balance sheet because that financial statement shows assets and liabilities. So even if they didn’t have the $20 MM in cash, they could have borrowed it. Either way, both possibilities would make that cash come from the balance sheet. I think it is amazing that you can have such an intimate knowledge of ConnectWise’s financial statements but not know how to read them.

  6. Avatar Joe Panettieri January 23, 2010 @ 6:31 pm
    Reply

    Griff H: Looks like I’m taking a few lumps over this blog entry… I don’t have an “intimate” knowledge of ConnectWise financial statements. But when ConnectWise Capital is officially launched I will be sure to ask how the effort is being funded, etc.
    -jp

  7. Avatar Griff H January 23, 2010 @ 8:35 pm
    Reply

    So sorry Joe! Please accept my sincerest apology. My previous post was directed at “Huh?” who was stating some incorrect assumptions about the financial aspects of the initiative you wrote about in this blog. I am very impressed by the strategy of ConnectWise and found your coverage to be informative and appropriate. Again, I’m very sorry that I was not more clear in my response.

  8. Avatar Joe Panettieri January 23, 2010 @ 10:03 pm
    Reply

    Griff H: No need to apologize to me. Sorry I misunderstood your reply. And “Huh” (comment 3″) raises a valid point in that I need to dig further and clarify the financial aspects of the forthcoming announcement. We continue to welcome comments, including ones that raise questions about our coverage.
    -jp

  9. Avatar Joe Panettieri January 25, 2010 @ 11:41 am
    Reply

    Update: The ConnectWise Capital announcement officially surfaced today (Jan. 25). According to the press release:

    “ConnectWise, the lT Industry’s leading application for professional service automation (PSA), announced the formation of ConnectWise Capital. The new arm will incubate innovative solutions to be sold exclusively through the IT channel. ConnectWise Capital has a $20,000,000 fund and plans to begin investing in promising companies immediately.”

    ConnectWise Co-founder David Bellini is going to manage the effort. The press release is short on details but I’ll be investigating more later today and this week.
    -jp

  10. Avatar Really? January 25, 2010 @ 12:38 pm
    Reply

    Hi Joe,
    This concerns me. Is Connectwise now going to be in direct competition with MSPs and VARs by investing in a select few? So they “invest” in Chartech others to become an actual reseller of serves doesn’t that mean start competing with everyone from Rackspace to some of the small MSPs that do SPLA with Microsoft or HaaS though whitebox leasing? This sounds like it is going to be an exclusive good old boys club and I think I want out. Time to review my agreement with them. Lastly, how will their other “partners” like N-able, Zenith and Level Platforms feel about this?

  11. Avatar Joe Panettieri January 25, 2010 @ 12:49 pm
    Reply

    Really: To the best of my knowledge ConnectWise Capital will involve a pure channel play. We’ll be covering the vendor reaction this week. Reader feedback/constructive criticism about our coverage and the news of the day always is welcome.

    But I appreciate it when comment posts use real names and disclose their company affiliations. We push for those disclosures to ensure readers have a good feel for the people behind the comment posts.

    -jp

  12. Avatar Huh Really? January 25, 2010 @ 2:52 pm
    Reply

    I agree with Huh. I think that Arnie seems to be blowing a lot of smoke these days. It’s the news blab of the week, but if he was actually doing everything that he says he is “going to do” in his press releases, he’d have to be Microsoft. I think that Joe is a “mouthpiece for Arnie.” How about doing some real reporting AFTER the guy actually does what he says he “PLANS” to do, instead of giving his musings the credibility it does not deserve, or being his free “trial balloon” platform???

  13. Avatar Bill Black January 25, 2010 @ 3:09 pm
    Reply

    I am excited about the possibilities that Connectwise Capital will bring to the channel. Their investment will strengthen the opportunities for a streamlined and system based business approach for MSPs that don’t have their own internal processes and development funds or personnel. The investment in other companies is Business 101 – everyone grows in the process, and all companies have the potential to court investors as they grow. Based on what I am reading, their investment is in the “innovative solutions” that help our MSP businesses succeed. CharTec (whose name keeps coming up) is one of those companies. Using CharTec increases my profitability and helps me to maintain a scalable and sustainable business model. Therefore, I see them as one of the “innovative solutions” that would benefit if Connectwise Capital were involved. The additional capital will increase the quality of offerings from these companies, as well as increasing further innovation. I don’t see it as any type of competition, and I would look forward to working with the good old boys club.

  14. Avatar Steve Eyton January 25, 2010 @ 4:13 pm
    Reply

    All interesting comments. Sure have a lot of speculation.
    I have been using ConnectWise services for a few years now and my experience has been good. They are constantly in contact with me and my company. I use Chartec as well and have been pleased with both companies regarding support and there willingness to listen to me on how to improve services. I get from them, How can I help you? Not, How can I sell more for them? Dell never asks, they ignore!
    Also, how many seminars have you gone to sponsored by your vendors that are free? Or training that is free? All you have to do is get there.
    So, if companies like CW and Chartec are willing to help me compete with larger companies without pouring money into the solution from my own pocket. What’s the downside? Are you saying they are under funded?
    I say wait until we know the full story before coming to too many conclusions. I personally am looking forward to hearing.
    Steve Eyton
    Expetec/AYCE Technology

  15. Avatar Eugene January 25, 2010 @ 8:43 pm
    Reply

    I agree it’s too early to really comment as all we can really do is ASS-u-me. I applaud those that are channel only, truly care to help the channel, and believe in the channel. If we continue to compete against one another, big business (Dell, etc…) will take over and destroy that last mile.
    I also agree with the other comments about posting names and affiliations. So on that note…we use Zenith as our RMM, Connectwise as our PSA, and thanks to Chartec we are able to offer HAAS allowing us to stay competitive. We also have attended their bootcamp and appreciate the training we received and business process materials that many others are hesitant to share.
    Want some of that money…innovate and put your heart into helping the channel and seeing others succeed.
    Givers Gain…reap what you sow. (not an HTG member)

    shameless plug -gt; http://www.mspchannelforum.com (new site)

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