Agent Behemoth Upstack Is Poised to Double Sales In 2022
‘We’re investing for the future and we are super bullish,’ says Upstack founder and CEO Chris Trapp. ‘Last year was a huge year for us. This year is going to be bigger than last year in terms of where we are tracking all of our opportunities and the momentum we have.’
Upstack, which has built the largest agent business in the world by buying 20 independent agents over the last 18 months, is set to double in size in 2022 as it continues its acquisition binge, said Upstack founder and CEO Chris Trapp.
“I don’t know the number of acquisitions we’ll do this year, but I can tell you in terms of scale we should double what we did last year in terms of revenue contribution (in 2022),” said Trapp, the mastermind behind the agent roll-up which is disrupting the telecom and cloud services channel.
The ambitious plans for growth come with the New York-headquartered Upstack already closing five deals this year including the acquisition of Connecticut based DVP Technologies and Clifton, New York based Subsidium Technologies just this week.
“We’re investing for the future and we are super bullish,” said Trapp, who built several successful colocation providers before founding Upstack in 2017. “Last year was a huge year for us. This year is going to be bigger than last year in terms of where we are tracking all of our opportunities and the momentum we have. It’s a beautiful thing when you invest in highly influential business owners. They attract other highly influential business owners as well. We have benefitted greatly from that and I think this year is going to be more successful than last year. And I think 2023 will be more successful than 2022.”
Make no mistake about it, Upstack’s ambition is to provide the kind of disruptive impact in the telecom/cloud agent market that other companies delivered with game changing technology in markets like real estate and Fintech.
“What we are doing could be considered bold in this industry, but it has been done in many other industries,” said Trapp. “Look at what technology enabled real estate brokerages have done in terms of creating value the last couple of years in residential real estate. Look at what Fintech is doing in the financial vertical and what technology enabled insurance brokerages are doing. As an entrepreneur you always want to look at tangential industries and learn from them.”
That said, Trapp knows the company has “a lot of work to do” to continue to build out a “great” business. “Walmart had one store for 17 years before they built their second store,” said Trapp. “It really takes a long time to build a great business. We have acquired a lot of great businesses. We have invested in a lot of great businesses. Upstack isn’t quite yet what I would define as a great business. We have got along way to go. And we have got a helluva lot of work to do to get there.”
The Upstack acquisition binge has been fueled with a $50 million investment from private equity lead investor Berkshire Partners and an additional $100 million last November from MidCap Financial and Morgan Stanley Private Credit. “We’re very fortunate to have one of the most prominent successful blue chip private equity funds in Berkshire Partners behind us,” Trapp said. “Their investment in Upstack attracted a lot of other people…I can assure you that we have no shortage of availability of capital.”
Upstack has provided an unprecedented equity opportunity for agents as part of a bigger company with “very compelling incentive structures” that allow them to earn “materially more income” than they would on their own, said Trapp. “For those businesses that we are most interested in we can always create more compelling economics at the end of the day,” he said. “That is what has enabled us to attract such a blue chip roster of agents.”
The high profile build out has made Upstack a “target” of sorts in the intensely competitive agent channel which includes tens of thousands of independent agents competing against one another to deliver complex telecom, cloud, 5G and data center solutions for customers.
Upstack is providing a wide range of recurring revenue services to customers including private and public cloud, security, colocation, SD-WAN, and unified communications. The company’s innovative Upstack software platform is designed to “level set pricing” and speed up the procurement process for customers.
“Nothing about what we do is easy,” said Trapp. “When you are disrupting an industry you have a big bulls eye on your back from the incumbents. We are highly transparent with everybody with respect to anybody in this industry as to exactly what our plans are. That is because our plans come from a position of strength and confidence in what we are doing.”
The Upstack model of bringing together the best and brightest agents is paying off in synergies that are making it extremely attractive to be an Upstack company, said Trapp. Taking the best practices from the likes of RDS, TeXium (acquired in January) and Global Communication Networks (acquired last October) is effectively redefining best practices for the agent business, said Trapp.
“We are taking the best of everyone and eliminating the weaker points each one has, we have a lot of work to do to really redefine what that is, but I can say very confidently that nobody has been able to do what we can do,” he said.
The cultural synergies are a litmus test for acquiring independent agents, said Trapp. “We have been very successful in making sure that we are only attracting companies that fit culturally,” he said. “If they don’t check that cultural due diligence box when we are thinking about presenting an offer then there are 30,000 others out there that might. The secret sauce for us at the end of the day is the people that we have attracted.”
The fast paced build out has put strain on the company’s leadership team, said Trapp. “You can ask my CFO and my head of M&A what it was like on December 30 trying to get a handful of transactions done by the end of the year,” he said. “It is not easy but if it wasn’t easy it wouldn’t be rewarding. We are having a lot of fun.”
Upstack now has 142 employees, up from nine a year ago, said Trapp, including 30 employees from RDS. The benefits of bringing in tight knit teams from independent agents is paying off in big cultural gains for Upstack and its agent companies, said Trapp.
“Upstack might be able to build the largest agency in the world relatively overnight but you can’t build those bonds overnight. A big part of the intrinsic value of these highly influential companies like RDS is they have established a culture that we aspire to have permeate throughout the entire Upstack organization. So it is really working closely with them learning how they are operating their businesses and building something together.”
The bold Upstack build out comes with the channel opportunity growing at a double digit annual compound annual growth rate, said Trapp. “If you look at the size of the IT channel we think it is going to double over the next seven to 10 years. We hope to have a solid percentage of ownership of that market a decade from now,” he said. “While we are the largest (agent) today we are still a small business. We’re proud of that. We are excited about the opportunity. We’ve got a long way to go to be in the Fortune 500. I think we can get there. That won’t happen overnight. But I think we will get there over the next 10 years.”