Upstack Private Equity Investment 'Largest in Agent Channel History'

Upstack is offering agents the ability to gain equity in the company.

James Anderson, Senior News Editor

April 14, 2021

7 Min Read
Big investment

New York-based Upstack recently closed what it calls the largest private equity investment in the history of the agent channel.

The four-year-old company announced an initial $50 million private equity investment from Berkshire Partners. Upstack had already raised more than $35 million before Berkshire’s investment. The funding helps Upstack expand its portfolio and buy other sales agencies. To date, the company has acquired ten other independent agents, with more transactions in the works.

Josh Johnson, principal at Berkshire Partners, said Upstack works in a burgeoning, yet “highly fragmented market.”


Berkshire’s Josh Johnson

“Our experience has reinforced the importance of the agent channel to enterprises designing and procuring digital infrastructure,” Johnson said. “Upstack’s platform accelerates this digital transformation by helping its advisers better serve their enterprise customers. We look forward to supporting Upstack’s continued growth through M&A and further investment in the platform.”

Keep up with the latest channel-impacting mergers and acquisitions in our M&A roundup.

Upstack founder and CEO Christopher Trapp said Upstack could have continued to buy companies without Berkshire; however, he said Berkshire helps his firm achieve its goals more effectively.


Upstack’s Christopher Trapp

“They have a track record of success with multibillion-dollar exits. That’s obviously what we’re positioning this business to be over the next several years,” Trapp said. “Bringing in a platform like Berkshire optimizes our chances of getting there.”

Berkshire has made a minority growth investment, which means that Upstack retains majority control.

Different Kind of Company

Although we have written extensively about consolidation involving national master agents, Upstack lands in a different category. The company identifies as a direct agency, transacts with several master agents and distributors, and will continue to do so. It competes with internet consulting firms, agents and subagents. Moreover, Trapp said Upstack is targeting top-performing agencies to join its team.

Trapp said the agent firms Upstack buys will function as equity partners in the business. Indeed, Trapp said Upstack intends to be the first “agent-owned enterprise” that gives channel partners direct equity. Consider, for example, how other industries view the term “partner” with esteem.

“If you’re a lawyer, and you join a law firm, your goal is to make partner. As a partner, you have equity. If you join Goldman-Sachs, your goal is to make partner. As a partner, you [have] equity in that company,” he said.

Similarly, the agents that join the Upstack team will earn compensation for Upstack’s future success.

“When there is a larger exit event at some point in the future (at some point in the future every business at eventually exits), the agents that were predominantly responsible for driving the success of that business get to share in the success as well at the equity level,” Trapp said.

Trapp said Upstack’s concept of an agent-owned enterprise stems from his status as an “outsider” to the channel.

Trapp comes from the supplier side of the channel — in particular, the data center/colocation side. He co-founded the company that preceded Aligned Energy, in addition to co-founding two other data center Virginia. His companies put him in contact with the indirect channel; however, he said the relationship between the channel and colocation services was in its infancy.

When he left his last company, he set out to learn about the larger IT channel. This research showed him a glaring statistic: Colocation accounted for only 10% of agents’ sales. Who would fill this gap? Moreover, Trapp said he found the agent business model very appealing. The rapidly evolving nature of technology puts suppliers in constant risk of losing relevance. Agents, on the other hand, can take advantage of disruption to advise their customers on the latest and greatest products. In addition, the pairing of residual commission streams and minimal risk made for an attractive proposition.

“I think every entrepreneur comes up with an audacious goal, and mine was to build the best direct sales agency in the country,” Trapp said.

Not a Master Agent

Trapp and his team first debated if they should form a master agency or a direct selling firm. But the answer seemed clear to them when they ran the numbers.

“We looked at the industry and said, ‘Wow, the total addressable market for direct agents is about five times the size of the master agency industry and about a thousand times more fragmented,” he said.

Trapp said master agents and direct selling agents differ significantly in what they emphasize. He said that while master agents need to stress their sales volume, direct agents need to emphasize “the quality of the actual production.” Moreover, Upstack runs the bulk of its business through …… master agent partners, in addition to running some direct agreements with suppliers.

“The master agents are very talented at managing the relationships with suppliers. The agents are very talented at managing the relationships with the customers. We’re focused on that. It would be dilutive to our value proposition if we tried to be great at both of those today. So we’re going to continue leveraging those masters going forward,” he said.

Upstack takes a “Switzerland” approach to the master agents, using the contracts that offer it the best value, and it will continue to harness master agents like Intelisys, Telarus, PlanetOne and Avant.

Upstack developed a technology platform to automate the manual components of designing and ordering telecom infrastructure. Agents told Trapp that if his team built the platform, they would happily join forces with them. Upstack built the platform, got its biggest colocation and data center provider partners to adopt it, and then re-approached the agents.

“We found out that if we could find ways to extract a lot of the non-production related activities on their plate, those agents in turn could be focusing much more of their effort in actually driving product and growing their businesses more rapidly with a much more comprehensive infrastructure behind them,” Trapp said.


Last summer, Upstack embarked on a series of acquisitions. As of this month, the company has acquired nine agencies, with the number close to reaching 12.

The purchased companies differ. In some cases, they are firms whose owners are retiring. Forrester predicted in 2017 that 40% of channel business owners would retire by 2024. However, other agents plan to work for 20 or more years and are looking for a larger opportunity.

These agents also differ in terms of branding. Some agents will take on the Upstack brand in order to move into larger customer accounts and compete against consultancies like Accenture. However, Trapp said Upstack is flexible with agents that want to maintain their own branding. The transactions may feature a 100% acquisition from Upstack or a minority growth investment.

Trapp said about 38% of Upstack’s residual revenue stems from colocation. That differs from the rest of the channel, where partners often start with telecom and learn how to advise customers about colocation.

For example, a 12-year-old Southern California agency exclusively sold colocation; however, its customers often requested help with the network. This banking customer wanted consultation around SD-WAN adoption, but the agent had never sold circuits or advised how to design them.

This agency teamed up with Upstack, which in turn paired it with an SD-WAN-focused agency. Now both companies are generating commissions.

“If you’re an agent that doesn’t have colocation experience and you have a customer that needs colocation services, we’re able to partner them with other agents within our ecosystem to build a partnership together and drive that sale,” Trapp said.

Trapp said this sort of collaboration often falls flat in the wrong ecosystem. For instance, he said when a distributor acquires a master agent, it often hopes that VARs and agents will collaborate with each other — VARs providing hardware expertise and agents providing service expertise. But without a relationship mediator, it’s difficult to prevent distrust and conflict.

“You’ve got two groups of sales professionals that are very wary of introducing any of their clients to any potential competitor, and it creates this natural friction that makes those referrals less likely.”

Upstack based its name on the idea of moving “up the stack” from physical data center infrastructure to connectivity solutions. In addition, Upstack plans to expand its portfolio to include unified communications and security.

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About the Author(s)

James Anderson

Senior News Editor, Channel Futures

James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.

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