ConnectWise Capital: More Investments Coming?

It has been roughly a year since Arnie Bellini (pictured) and David Bellini launched ConnectWise Capital, an investment fund that seeks to incubate channel-centric IT solutions for managed services providers (MSPs) and VARs. So, how are the first two investments -- CharTec and LabTech Software performing? And can we expect ConnectWise Capital to make new investments? Both Arnie Bellini and David Bellini share some insights in an MSPmentor FastChat Video.

First, a little background: I'm waiting for a Red Eye flight from San Francisco to New York. The extended wait has given me some time to really consider ConnectWise Capital's impact in the managed services market over the past year.

As you may recall, Arnie Bellini has been evangelizing the modern office concept to MSPs, VARs and IT services providers within the small business sector. The idea is for solutions providers to specialize in IT services that will remain lucrative even as technology shifts occur. Examples include VoIP, email management, network storage and security, cloud computing, and telecommuting/mobile workforce support.

Now, here's the FastChat with Arnie Bellini and David Bellini, recorded about a week ago during my visit to ConnectWise's headquarters in Tampa, Fla. Plus, my perspectives below.


Personal Perspectives

When ConnectWise Capital invested in CharTec and LabTech roughly a year ago, I suspected CharTec would be a home run because of its hardware as a service (HaaS) expertise, and I thought LabTech's success would be more limited because it was a traditional on-premise RMM (remote monitoring and management) solution rather than a SaaS-based offering.

In retrospect I was somewhat wrong on both fronts. CharTec has certainly been successful but the story involves more than HaaS. I didn't really anticipate CharTec getting into the Backup and Disaster Recovery market... though I should have. According to a ConnectWise Capital press release, CharTec sales grew more than 2,300 percent in 2010 -- though I don't have the actual dollars-and-cents figures. The big percentage growth rate could be based on a conservative starting dollar figure for 2009... or it could be based on the combined sales savvy of Arnie Bellini and CharTec CEO Alex Rogers.

Meanwhile, I missed the boat on LabTech. There are numerous, highly regarded RMM (remote monitoring and management) tools on the market. I figured there wouldn't be much room for LabTech to compete, especially since it was purely an on-premise solution. But LabTech won over plenty of MSPs, and the integration with ConnectWise further strengthened LabTech's story. And so far, LabTech is leaving the SaaS market to entrepreneurial businesses like TechLabCloud.

According to a ConnectWise Capital press release, LabTech "enjoyed a record year of growth increasing revenues month over month for nine consecutive periods and developing partnerships with more than 1,100 IT solution providers."

Keeping Score

Let's put aside the growth of CharTec and LabTech for a moment. And let's explore a more basic question: Has ConnectWise Capital actually helped VARs and MSPs? In numerous cases, absolutely yes.

I've heard from scores of readers who say the ConnectWise Capital-LabTech combo has generated healthy, cost-effective competition against Kaseya, which has a big installed base of MSPs. And here's an interesting twist: Even MSPs who remain firmly in Kaseya's camp are silently applauding the ConnectWise Capital-LabTech relationship, because the competition has made Kaseya more responsive to MSP needs, my sources in the Kaseya partner ecosystem say.

Are ConnectWise and its investment arm perfect? Certainly not. I hear from some readers who want better integration between certain platforms -- such as ConnectWise and Zenith Infotech, or between ConnectWise and some third-party backup and disaster recovery solutions. Privately, some Zenith partners and a few Online Backup providers worry they won't receive integration priority since ConnectWise Capital is focused on the LabTech and CharTec relationships.

I see both sides of the story: Earlier this month, ConnectWise CTO Linda Catrett Brotherton told me she was working to ensure ConnectWise would develop and share more APIs with technology partners this year. Her tone was genuine. Also, it's important to note that the LabTech-ConnectWise integration existed prior to the ConnectWise Capital Investment... and I have heard progress on the ConnectWise-Zenith integration front.

Remember Windows Drivers?

In ConnectWise's defense, the company doesn't have the time to write integrations to scores of third-party platforms. It's a bit like the world of Microsoft Windows -- where Microsoft publishes the APIs and other specifications, then partners (hardware companies, software companies, etc.) write the drivers.

That's the model for ConnectWise going forward. Assuming CTO Brotherton makes good on her vow to develop and share more ConnectWise APIs with partners, the model should work. Windows proved it. Sure, plenty of Windows ISVs imploded (WordPerfect, Corel, etc.). But thousands thrived... particularly the most aggressive, sales-centric ISVs (prime example: Oracle on Windows Server).

Future ConnectWise Capital Investments?

Now, pure speculation: Where might ConnectWise Capital invest its money next? I concede: I don't have any firm leads... just hunches.

Arnie Bellini has spoken so much about help desk and vendor management opportunities in recent months... so I wouldn't be surprised if ConnectWise Capital was looking for opportunities in those areas. (Though it sounds like LabTech may already address some of the help desk opportunity.)

Other potential areas of investment? Re-read that ConnectWise Capital press release from earlier this week. It stated:
"Investment candidates are channel-focused companies that offer IT solution providers opportunities to deploy and manage resources their clients most rely on in a Modern Office™ such as VoIP, email management, network storage and security, cloud computing, and telecommuting/mobile workforce support."
That's a pretty broad list. Or is it? Think of it this way: The network storage and security markets are massive, but the list of potential investments gets far shorter when you focus purely on network storage and security upstarts within the managed services niche. Director of Strategic Initiatives Gerwai Todd is vetting through potential investment candidates, but Arnie and David Bellini will ultimately decide which candidates warrant investment.

My best guess: ConnectWise Capital will unveil another investment in the first half of 2011.

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