Managed Services Software Company Funding: Who's Next?

Managed Services Software Company Funding: Who's Next?

By raising $6 million in new funding, Autotask joins a lengthy list of MSP-centric software companies and cloud services providers that has tapped private equity or venture capital -- or made acquisitions in 2011. Here's the scorecard... and a look at two cloud-centric software companies that will very likely raise money next.

Among the existing and potential funding deals MSPmentor is watching:

1. AppNeta, which develops cloud-based provider of network performance management solutions, raised $6.2 million in April 2011 and claimed, at the time, to have an installed base of more than 1,000 MSPs and enterprise customers.

2. Axcient, which promotes data backup and business continuity services to resellers and MSPs, raised $15.5 million in October 2011, bringing total funding to $33.5 million.

3. ConnectWise Capital invested in Quosal, the quoting software and sales proposal system, in May 2011. Now ConnectWise is more tightly integrating its software with Quosal and LabTech Software, though ConnectWise says its APIs are open to all developer partners. The ConnectWise Capital Fund was initially set up to invest about $20 million in channel-centric technology companies; MSPmentor does not know how much of the $20 million ConnectWise has used on its first three investments: CharTec, Quosal and LabTech.

4. Sources say Doyenz, the cloud-based data recovery service provider for MSPs, is preparing to raise its first round of potential venture capital. Angel investors provided an earlier round of funding.

5. Kaseya acquired Intellipool in May 2011 as part of a push to bolster its network monitoring software. In terms of Kaseya itself, CEO Gerald Blackie tells MSPmentor the company remains self-funded, profitable and debt free and has no plans to raise money.

6. N-able Technologies, the RMM (remote monitoring and management) software provider, raised an undisclosed sum from private equity firms to accelerate its 100 percent SMB coverage and freemium software strategy.

7. Nimsoft, empowered by parent CA Technologies, quietly acquired service desk management software and launched a complete platform in April 2011.

8. Source say Reflexion Networks, an email security firm that works closely with MSPs, is close to raising significant money to accelerate growth.

9. Technology Capital Investors has been pumping money into MSPs and MSP-centric technology companies such as OS33.

10. Zenith Infotech spun off its Zenith RMM business to Summit Partners, though the deal is clouded in controversy because Zenith Infotech defaulted on a bond payment in September 2011.

11. Whom did I miss? I realize numerous cloud services providers -- particularly in the storage market -- have raised money this year. But sometimes I overlook some of the deals.

Risks, Rewards and Reality Checks

It's good to see money flowing into software companies and cloud services providers that empower MSPs and the IT channel. And I'm highly confident more funding deals will be announced within weeks or months (keep a close eye on Doyenz and Reflexion, respectively). The current and pending funding deals prove that investors remain highly confident in the managed services market.

However, MSPmentor does not want to hype the funding activities. As the Zenith Infotech bond default has shown us, sometimes debt can trigger considerable business stress -- though Zenith Infotech CEO Akash Saraf has said the company remains stable and on firm financial ground.

Also of note: Financial terms of private equity deals often aren't disclosed, making it difficult to see the financial makeup of a company.

Hello IPO?

In most cases, I believe the private equity deals and venture capital flowing into the MSP software market is a good thing. But the real proof of success will come when (A) some MSP software providers pursue IPOs or (B) other MSP software providers attract takeover money from big IT hardware and software companies.
TAGS: Financing
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