ConnectWise has appointed longtime Tech Data CEO Steve Raymund to its board of directors to in part help the company evaluates options for outside financing.
The Tampa, Fla.-based IT service management vendor said Raymund would help ConnectWise think through the pros and cons associated with an initial public offering, taking venture capital funds, or borrowing money from the banks, according to Arnie Bellini, ConnectWise's CEO. Raymund took Tech Data public back in 1986 and chaired the company's board of directors from April 1991 until this June.
"ConnectWise is on a tear," Raymund said. "They're growing. They have every avenue of finance available to them. And they're being courted by everybody and anybody from a capital-raising standpoint."
ConnectWise is 100 percent employee-owned, with co-founders Arnie and David Bellini – currently president and managing director of ConnectWise International – each holding a significant stake in the firm. It is the only one of the major IT service management vendors not to be majority-held by a private equity firm.
Thoma Bravo has owned Continuum since June 2017; SolarWinds, the parent of SolarWinds MSP, has been owned by Thoma Bravo and Silver Lake since February 2016; Vista Equity Partners has held Autotask since June 2014; and Insight Venture Partners acquired a controlling interest in Kaseya in June 2013.
"When I look at our competitors, I believe that their venture capital is preventing them from being innovative and preventing them from doing the proper research and development to be relevant in the future," Bellini said. "Venture capital has different incentives and different focal points that create decisions in the board room that may or may not be the best long-term decisions for a company."
ConnectWise today has zero venture capital, zero debt and a monthly free cash flow in excess of $1 million that can be allocated toward investments, Bellini said. At the same time, Bellini said ConnectWise has $40 million to $80 million of bank financing that could be put in place, and has already assembled a syndicate that could take the company public at any time.
But Raymund (pictured) has helped ConnectWise realize that the company doesn't need to make a capital-raising decision right away since the company is generating its own free cash to the bottom line doesn't have a viable list of acquisition targets that would stretch the company past what it could finance on its own, according to Bellini.
"Access to capital is in no way, shape or form an issue impeding this company's growth," Raymund said.
Being employee-owned has enabled ConnectWise to focus its investments on what's best for the company over a time horizon of five-to-fifteen years, Bellini said. In contrast, Bellini said venture capital firms are typically looking to exit their investments within four years, and are therefore more focused on what companies are doing right now to create immediate value.