Comments on: Why Venture Capitalists Are Down, And MSP Software Companies Are Up

By: Joe Panettieri

Joe Panettieri — Tue, 07 Apr 2009 21:46:51 +0000

Mark: You’ve offered the other side of the story. You’re right. The original blog post read as if private equity is a “bad” thing. Certainly, that’s not an accurate message and you’ve accurately called me out on it.

-jp

By: Mark Bebout

Mark Bebout — Tue, 07 Apr 2009 17:17:30 +0000

While I think that it is great that companies are able to sustain themselves financially, I don’t think that being a company backed by private equity is bad either. The tone of this article seems to be negative toward private equity.

I believe that whether private equity is good for your business or not depends a lot on your goals for the business. Companies that set out on a high-growth track (usually positioning themselves to be involved in an M&A later) know that in order to compress time and accelerate growth they are going to need to rely on a large capital infusion in the beginning, as well as add-on rounds of funding later. Of course from the perspective of the owner, this may not be the best option if retaining more than 2/3 of your company is vital to you.

To Matt’s point about valuations; you are right, private equity groups are always looking for a good deal. Nothing wrong with that, we are all looking for good deals. But part of a good deal means that the company is (or can be soon) profitable. Depending on the circumstances, a “profitable firm that needs funding to grow” is often time more capable of taking on debt financing at a better rate than equity financing. Again, it just depends on the circumstances.

Private equity firms have helped to bring some great technologies and companies to us. There is a valuable role for these firms to play in the future for the right companies.

By: Matt Nachtrab

Matt Nachtrab — Sun, 05 Apr 2009 16:49:38 +0000

LabTech Software gets calls every week from Venture Capital firms. We are self funded as well and have never needed investment money. I do not feel that the venture firms that contacted us understand the growth potential in this industry, so their offers do not even come close to the true valuation of the business. They are just looking to get a good deal for a share of the business. The funny thing is that only firms desperate for cash would be willing to take funds from Venture capital, so they miss out on profitable firms that need funding to grow…

By: JK

JK — Fri, 17 Oct 2008 16:38:18 +0000

Anybody that can get funding in this economic climate must have one heck of a business

By: Joe Panettieri

Joe Panettieri — Thu, 16 Oct 2008 14:33:56 +0000

Frankie: Are you saying I can now relax? Kidding aside, thanks for the note. I don’t want to suggest that ALL MSP software companies have been conservative with their money, but many of them certainly were.

By: Frankie Says

Frankie Says — Thu, 16 Oct 2008 14:06:07 +0000

Bravo. You are the first web site to identify why the MSP industry will hold up better than other emerging IT markets.

I do think SMBs will slow down on their managed services spending.

But the MSP software providers have been very conservative in the way they find and raise money. It sounds like they learned from the excesses of the dot-com boom.