ConnectWise Capital: More Thoughts

When ConnectWise announced ConnectWise Capital earlier today, some readers asked me two point-blank questions: First, where is ConnectWise getting the $20 million for ConnectWise Capital? Second, is it possible for a technology company to (A) launch a venture fund while (B) maintaining existing hardware and software partnerships? Here are some potential answers.

First, some background: ConnectWise earlier today announced ConnectWise Capital -- a $20 million effort to help incubate a range of technology companies. Which companies? I expect some answers in February or so.

In the meantime, some readers have asked me where ConnectWise Capital got the $20 million. According to ConnectWise COO Santo Cannone:

Arnie and David [Bellini] have been in business for 28 years.  They’re both CPAs. The original IT services company has been posting 40% profit for many years. The software company is doing very well, also.  Arnie and David have invested wisely over the years. So, this is a ConnectWise-only fund. There are no outside investors.
Here's some background on Arnie and David Bellini, co-founders of ConnectWise.

I also asked Cannone if the ConnectWise Capital companies would have specific exit strategies. Cannone's reply:
"The member companies can have any number of exit strategies.  What I can tell you is that we are making these investments with a long-term view. We’re looking for returns based on building businesses that deliver value for our partners over a number of years."

Partner Reactions

As I mentioned in our Jan. 22 coverage, ConnectWise will need to maintain a careful balancing act -- keeping its APIs open to existing technology partners, while ConnectWise Capital funds some industry upstarts.

Read between the lines, and ConnectWise mentioned the balancing act in the ConnectWise Capital press release. In which, ConnectWise co-founder David Bellini states:
“Our commitment to simple and powerful integration has been embraced by over 300 companies who use our APIs to integrate into ConnectWise. This gives our partners massive choice and significant flexibility to select and deliver offerings for their clients. ConnectWise Capital will further expand these choices with companies that are pure channel plays.”
I've reached out to a range of ConnectWise technology partners for their thoughts.

Emulating Intel Capital?

In the meantime, some readers have asked me if there are examples of technology companies (A) launching a venture fund while (B) maintaining existing hardware and software partnerships?

The answer is yes. I'll point to Intel Capital as one prime example. On the one hand, Intel Capital invested in LogMeIn (remote management), MySQL (open source database) and VMware (virtualization). On the other hand, Intel maintained close relationships with a range of remote management, database and virtualization companies during those Intel Capital efforts.

In most ways, I realize, Intel Capital vs. ConnectWise Capital involves an apples to oranges comparison. Intel Capital has pumped $9 billion into 1,000 companies since 1991. ConnectWise Capital is just getting started and has a much smaller ($20 million) starting point.

Intel is a massive company that dominates a mature, slower-growing market. In contrast, ConnectWise is in a faster-growth, highly fragmented market where I believe most MSP software companies have yet to crack the $50 million annual revenue mark.

I'll close by reiterating my thoughts from Jan. 22.
  • I have no idea if ConnectWise Capital will succeed.
  • I do think the rules of the managed services market are changing.
  • I believe ConnectWise Capital will strive to build new channel opportunities for VARs and MSPs. Of course, ConnectWise Capital also hopes to profit from those efforts.
  • And ConnectWise will need to work hard to maintain its existing API integration partnerships with non-fund members.
That's all I have to say about that... at least for the next few hours.
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