Private Equity? Product-Led Growth? Overrated.

I trust few will disagree when I observe that opinions in IT about private equity are…mixed.

I know plenty of MSPs who groan in anticipation of reduced support and increased prices whenever a favorite vendor gets acquired by PE. It’s not hard to find even less subtle perspectives in gathering spots online either.

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I’ve interviewed enough vendor execs after an acquisition, however, to know that in their eyes a buyout means more than just a fat payday after a lot of hard work. It means, among other things, more developers making faster progress on a more aggressive roadmap.

That’s certainly how Michael George (pictured), the recently named CEO of managed services tool maker Syncro, sees things. “If you don’t have a capital partner to help you fund your business, you’re basically depending on your profitability through your customers to fund your innovation, and your innovation curve is limited to how profitable you can be,” he says.

It’s an assertion founded in experience. George became CEO of Zenith RMM when private equity investor Summit Partners bought the company late in 2011, shortly before renaming it Continuum. Growth funded by that deal helped Continuum attract the interest of an even larger PE firm, Thoma Bravo, six years later. Thoma Bravo, in turn, combined Continuum with another of its portfolio companies, managed services giant ConnectWise, less than 28 months after that.

So George clearly has no quarrel with buyouts. Leveraged buyouts are another story, however, in ways that factor heavily in his strategy for helping Syncro realize ambitious goals.

And George’s goals for the company he now leads are undeniably ambitious. In any market and any industry, he contends, only the top three players really matter. In managed services software, those are ConnectWise, Kaseya, and N-able right now, with NinjaOne and its recent $1.9 billion valuation nipping at their heels. George wants nothing less than to displace one of those companies at the top of the managed services pyramid.

“Customers generally can only count to three,” he says. “We will be one of the next generation of threes in the market.”

His confidence stems from the fact that while PE firm Mainsail Partners poured big money into Syncro in 2020, there was no borrowing involved. “We’re in this sweet spot of having no debt as a function of our ownership, but having a capital partner to fund our innovation,” George says.

And generously at that. “We’re investing more this year in product and engineering alone than we have in the entire history of the company collectively,” George says.

ConnectWise, Kaseya, and N-able (a publicly traded company with investors to please, including Thoma Bravo and fellow private investor Silver Lake Partners) are weighed down by all the leverage used to buy them, George contends, and a persistently challenging interest rate environment.

“We’re nimble and spry and well-funded,” he says. “They’re servicing debt.”

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No tech debt either

I suspect all three of Syncro’s targets have a different take on the matter. ConnectWise, for one, seems to have no shortage of funding for product and partner investments at its disposal right now. We’ll see if the same is true for N-able next week during its Empower event outside Dallas and for Kaseya a month from now at its own partner conference.

Borrowed money, however, isn’t the only kind of debt putting industry leaders at a disadvantage relative to Syncro at present, according to George. “We don’t have the technical debt of being a 10 or 30-year-old architected company,” he says. “We’re built on modern tools.”

Less tech debt means less vulnerability than peers to attackers, he continues, and faster movement into areas like AI and RPA.

“I don’t want to get too far ahead of myself, but you’ll be hearing things from us sometime in the sort of June, July timeframe where we’re trying to achieve a level of autonomic computing where computers are sort of self-healing,” George says.

Of course, Atera is headed to the exact same destination and ConnectWise plans to get there shortly too. It’s probably too soon to say which companies MSPs will name when counting down the top three IT management vendors in the future.

Why product-led sales beats product-led growth in security and beyond

Product-led growth is making a whole bunch of SaaS vendors a whole lot of money. It’s also making a lot of other companies nervous.

Even a rocketship channel success story like Pax8 (number 1,038 on the latest Inc. 5000 list with a 571% three-year revenue growth rate) is apprehensive enough about the phenomenon to be pumping wads of cash into a next-generation marketplace specifically aimed at preventing PLG from cutting MSPs and Pax8 itself out of the cloud software sales loop.

That said, I sometimes suspect the companies that should be most nervous about product-led growth are the ones most deeply bought into product-led growth.

I had a chance to discuss PLG recently with Ross Haleliuk (pictured), head of product at SecOps vendor LimaCharlie and one of my favorite security bloggers. Haleliuk was and remains a believer in the power of letting buyers lay hands on security software without first talking to a salesperson. Yet for reasons he described in a recent (highly recommended) post and shared with me as well, he’s reached a more nuanced perspective on the topic for reasons with implications, I’d argue, beyond security software alone.

For one thing, PLG tends to work best with products that individual users can download for their own use and then gradually convince everyone else to adopt too. To cite a real-world example, I downloaded a freebie copy of Notion out of curiosity early in the history of Channel Mastered, the consultancy I’m part of, and it soon became a company-wide collaboration standard. Security solutions, among others, have a harder time following that path.

“Security doesn’t have a single player mode,” Haleliuk observes. “The whole company has to embrace a tool for that tool to be approved, for that tool to be deployed, for that tool to be implemented.”

Furthermore, while just 17% of the time buyers spend learning about solutions involves a salesperson these days versus 51% five years ago, according to channel expert Janet Schijns, that remaining 17% is critical, and especially for SMBs.

“SMBs don’t really know how to evaluate tools,” Haleliuk says. “The inability to even understand and comprehend what it is that you actually need makes PLG very hard.”

Or hard to handle alone, at least, which is why Haleliuk (and McKinsey) now prefer product-led sales to product-led growth. By all means, the thinking goes, let a would-be customer download a trial edition of something and tinker with it. “But once they show some sales intent, some intent to buy, they would still need to contact the sales team,” Haleliuk says.

Or the channel team, he continues, in the SMB market. “If you are a business that is trying to reach a large number of SMBs, you have a much higher chance of doing so by going to channel partners than you would by trying to build a self-serve solution.”

Hence my suggestion before that it’s the companies most fervently embracing PLG that should be most worried about it. They’re going to have a hard time selling SMB solutions without a channel partner somewhere in the process for the foreseeable future.

“Potentially the prospect can click and subscribe and give them a try, but I think we’re still a long way from the time where people can do that at scale,” Haleliuk says. “If anything, I think for the years to come the role of the channel is only going to get stronger.”

100,000 good reasons to check out a podcast

A few weeks ago, I hopped onto a Zoom call with someone audibly shaken by a webinar he’d just attended in which compliance guru Mike Semel outlined the sobering implications for MSPs—including those who don’t work with Defense Department contractors—of the federal government’s revised CMMC requirements.

I’ve been meaning to talk to Semel about that ever since, but wound up doing the next best thing last weekend by listening to an excellent interview he did with Dave Sobel on the Business of Tech podcast. I came away from the show with an appreciation for the many reasons CMMC 2.0 is a scary topic for IT providers (beginning with the estimated $100,000 it’ll cost them just to do a compliance assessment, let alone clean up any gaps they uncover), but also a hopeful outlook on what they can do about it. Well worth a listen.

Speaking of compliance, interviews, and podcasts…

This week’s episode of the podcast I co-host, MSP Chat, features a conversation with Carl Bjerke, CEO and chief solution architect of Compliancy. Worth a listen too!

Also worth noting

During last year’s partner summit, Cisco said its $28 billion Splunk acquisition would close late in the fiscal quarter ending next month. This week it came in early.

Keeper Security has freshened up its admin console and onboarding process.

Cato Networks has added AI-based network incident detection and response to its SASE Cloud platform to help technicians diagnose outages faster.

Arrow Electronics has introduced an “AI-powered cloud business companion” designed to help partners expose new opportunities and increase operating efficiencies.

Veritas has added malware detection, role-based permissions, and more to its Backup Exec solution.

JumpCloud’s acquisition of asset management and SaaS security vendor Resmo is its latest effort to combat shadow IT.

eSentire says its new threat intelligence solution (the MDR vendor’s first stand-alone product) has a 99% true positive rate.

Edge computing, AI, and machine learning solutions require a lot of data center infrastructure. Eaton’s modular SmartRack offering aims to make adding more easier.

Wildix has four new VoIP desk phones for different settings and roles.

Moovila CEO Mike Psenka is now a member of CompTIA’s AI Advisory Council.

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