Comments on: Venture Capitalists Evaluate Managed Services Software Market

By: Joe Panettieri

Joe Panettieri — Wed, 08 Jul 2009 13:00:27 +0000

Asset: Are you a real person or comment spam?

By: Asset

Asset — Wed, 08 Jul 2009 06:58:02 +0000

Venture Capitalists are doing right by evaluating Manged Services Software providers. Since the current market trend says do not invest money until your are fully secure. Best of luck for your next conversation. FromASSET

By: Joe Panettieri

Joe Panettieri — Sat, 23 May 2009 01:00:33 +0000

Steve: I like your thought process. Too many people focus on the exit strategy first. Too few on building the asset first. Build the asset and great exit options — if desired — materialize.

Please note that a couple of your comments got caught in our spam filter because they contained linked, but I spotted them and approved for post. Sorry for the delay.
-jp

By: Steve Goodman

Steve Goodman — Sat, 23 May 2009 00:49:13 +0000

Joe –

We expect to raise expansion capital, but certainly don’t need it to be a viable profitable business in the MSP space. If we want to compete with SolarWinds, however, we’ll need it. As it relates to exit, we are focused only on building a wonderful, large, profitable business that scales. If we do that, the exit for investors takes care of itself.

Best regards,
Steve Goodman, CEO
PacketTrap Networks

By: Steve Goodman

Steve Goodman — Fri, 22 May 2009 20:30:43 +0000

We have not done a Series B to date, but not because it hasn’t been offered. It always comes down to how much money we need, what valuation is right for us and our investors, and what is the proper path to execute. As for exit specifically, we are focused on building a wonderful long term business, whether the exit comes sooner or latter doesn’t really matter. Creating value creates large exits for our investors (either acquisition or IPO) and if we can continue to build relationships with MSPs and End User IT departments at our current clip, I think we’ll be in good shape.

The MSP market is clearly a focus market for us, however, it’s our experience the larger network management market (where SolarWinds is) is substantially and orders of magnitude larger. We do love the MSP market, however, because it’s a win-win for our MSPs and us.

Steve Goodman, CEO
PacketTrap Networks
http://www.PacketTrap.com

By: Joe Panettieri

Joe Panettieri — Fri, 22 May 2009 18:48:02 +0000

Steve: Always good to have executive insights on MSPmentor. I see your Series A funding ($5M) was October 2007. Did you ever do a Series B? Or are you fine with the Series A? Keep us posted. I’m always curious about exit strategies, funding strategies, etc. And so are our readers.

Best
-jp

By: Steve Goodman

Steve Goodman — Fri, 22 May 2009 16:45:46 +0000

Joe

One of our guys mentioned this post to me this morning. This is a great discussion. We are one of the only venture backed (August Capital) software vendor that focuses on the MSP markets. This market, in and of itself, is not a VC market. It’s not big enough, at least for the tier 1 VCs in Silicon Valley that want “game changing” returns. Together with the direct mid market, it’s a VC backable market. I’ve personally spent time over the last several years with at least 20-25 VCs in Silicon Valley talking about the MSP market as well as the direct market. Also, our management team is from SonicWALL, so we know a little bit about the type of MSPs that service the SMB market. There are great MSPs out there, but we and most of the VCs in Silicon Valley don’t believe there are enough of them (and who can sell licensees) to create a huge market. It may be enough to build a nice business ($50 MM a year in revs), but that’s not the type of business that VCs want to invest in. They want to invest in companies where they can see visibility into a $100 MM + run rate businesses.
Steve Goodman
CEO, PacketTrap Networks

By: Steve Goodman

Steve Goodman — Fri, 22 May 2009 13:57:37 +0000

As a company backed by tier 1 VC August Capital we think about the MSP market the same way that Joe and his contacs do. We are not conviced that the MSP market by itself (and either do more than 20 VCs we’ve talked to here in Silicon Valley) is large enough for a VC investment. Whether you think there are 50k potential MSPs or 120k potential MSPs, the math just doesn’t work considering the drop off rate etc. The market isn’t large enough. The way to make this work in scale for a VC is to hit the MSP market as a stepping stone to the direct market where SolarWinds plays. You can build a cute business going direct to the MSP market, but you can’t build a SolarWinds.

Steve Rodman
Business Development
PacketTrap Networks
http://www.PacketTrap.com

By: Joe Panettieri

Joe Panettieri — Fri, 22 May 2009 12:02:31 +0000

Chris: Thanks for clarifications on comments 2, 3. Your thoughts about a “tipping point” caught my attention. I think the industry reached a small tipping point about three years ago, when leading VARs started to really succeed as MSPs. But it was a wave isolated to the IT channel.

A bigger tipping point could be coming, where this software becomes standard operating procedure for business processes across the channel and midmarket organizations. But I’m not sure how many software companies will participate in this bigger tipping point/wave. Ironically, I think it will look like this…

1. First wave to VARs: small but successful, involving numerous software providers
2. Second wave to VARs and midmarket: much larger, but potentially involving fewer software providers amid industry consolidation

By: Chris Martin

Chris Martin — Fri, 22 May 2009 11:52:57 +0000

sorry, just to make it clear (i had a question from somebody), when i wrote ‘we’, i mean the industry in general, not HoundDog Technology.

….. we could be reaching a tipping point in understanding how to run these types of businesses efficiently

ie: the knowledge to run these businesses efficiently is reaching a tipping point (in my view)

Chris Martin
HoundDog Technology
Easy, Affordable Tools for IT Support / MSP’s