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Electric CEO Ryan Denehy: The ChannelE2E Interview

How are next-generation MSPs (managed IT service providers) automating and scaling their businesses? Some of the clearest answers come from Electric — an IT support provider backed by venture capital funding.

Yes, Electric offers IT services and leverages familiar automation tools from Cisco Meraki, Jamf, Kaseya, Slack and Ubiquiti Networks. But ultimately, the MSP is transforming into a software provider.

LinkedIn: Ryan Denehy, CEO, Electric

Last we heard, Electric had raised $25 million in Series B funding — lifting the MSP’s total funding in early 2019 to $38 million. Key backers include GGV Capital and Bessemer Venture Partners.

Fast forward to July 2020. Seeking an update on Electric’s business strategy, automation and software efforts, ChannelE2E checked in with CEO Ryan Denehy. Here’s a recap of the interview over email.

ChannelE2E: It has been roughly 18 months since Electric raised $25M in Series B funding. How did you leverage the funding and evolve Electric?

Denehy: First, we wanted to prove that an MSP could organically add six or seven figures of new annual recurring revenue every month. In our segment, which is targeting the SMB and middle market, that’s a lot of managed services to sell. Thankfully, we have a fantastic marketing department and stellar sales team. We cracked the code on going outbound to find customers and then selling managed services over the phone. As a result, we’ve had many $1M (bookings) months in the past 12 months! Obviously that required a big up front investment and that’s where the capital came in handy.

The second area was product and engineering. Our goal long-term is not to be a services company but to sell software to end customers. While we provide a lot of services today, we have a 40-person (and growing) software development team who is laser focused on automating IT tasks and creating easy to use software for our customers. What you’ll see is that over time more and more of our solution is delivered via our software and as that happens we will likely push more of the bespoke services to channel partners.

ChannelE2E: How many employees does Electric now have, and where have you focused most of your hiring over the past year?

Denehy: We’re about 200 worldwide. We have about 140 in the NYC area and the rest split between Argentina, Bangalore and Rochester. We’ve been hiring across all departments to keep pace with the growth, but in the past year my big focus was on building out our executive leadership team. Our goal is to become a $10B+ company, a publicly-traded company, and that starts with having excellent leadership.

Electric’s dashboard

ChannelE2E: Unlike many MSPs, you have a software development team. Where are your developers focusing their time and efforts?

Denehy: About half is on front end tools that make it easy for people to manage IT related tasks that are important for their job. For example, a web dashboard that any hiring manager can use to onboard or offboard an employee with all IT tasks like accounts, security, the computer itself etc… We’ve gotten that down to about a 30 second process that anybody can do. For IT managers, we’re building tools that can sit on top of multiple agents and multiple platforms and serve up data, insights and actions so that they can do their jobs better.

The other half is pure automation – how can we take an IT task like troubleshooting the network or configuring a policy and eliminate 95% or 100% of the human work? How can we leverage data to make those systems smarter and more predictive over time? That’s what we’re focused on.

ChannelE2E: Electric made early bets on Slack and other collaboration tools. How have those bets played out?

Denehy: So far they have been great bets. We integrated with Slack early on because we knew modern IT buyers at SMBs didn’t like using ticketing systems, they didn’t like to make phone calls for things that didn’t really require a phone call so a chat tool they were already using made sense. Late last year we also decided to integrate with Teams. It was a bit of a risk but that too played out very well. We obviously had no idea that a pandemic would cause ⅓ of the US population to start using Slack or Teams! Our focus will continue to be on integrating with the tools that modern IT buyers love to use so that it’s easy to interact with us on whatever platform you use. Down the road we may add Alexa or Google so you can just yell to submit a ticket!

ChannelE2E is closely tracking next-generation technologies like Robotic Process Automation (RPA). Do you see opportunities for RPA to further automate Electric and your customers’ businesses. Or are there other paths to automation ahead?

Denehy: RPA is great at the large enterprise level because you can take a tool like UIPath and automate large-scale processes like running payroll for 10,000 employees, for example. Where we’re different is that we’re staying focused on developing automation for IT specific purposes for SMB and MM businesses. As a result, our mandate is that in addition to automation we have to make it extremely easy to deploy and use our tools. We see our opportunity more as being the “ServiceNow for the SMB/MM” than trying to tackle broader themes around business automation.

ChannelE2E: Have you evolved your business strategy or execution amid the coronavirus pandemic? If so, how – and what have been the outcomes?

Denehy: Fortunately we raised an additional $14M as the pandemic started and another $7M during the pandemic. We did this so that we could invest even more aggressively into solutions that make working from home easier for our customers, and so that we could continue to be aggressive on sales and marketing and engineering hiring regardless of the short-term macro environment.

The results have been great so far – sales in May were back to pre-pandemic levels and June is nearly 2x what we did in May. The response to our marketing has been incredible. The question now is – what are the long-term economic impacts? What happens to SMBs when PPP funding runs out? What are the second and third order impacts of a weak economy? It’s unclear so we’ll just need to stay close to the data and pivot as needed.

ChannelE2E: What are Electric’s key priorities for the second half of 2020, and then onto 2021 and beyond?

Denehy: We’re on the hunt to do some M&A in the second half of this year – specifically to buy one or two MSPs that can be really strategic to where we want to take the business. It might sound counterintuitive to buy a services business since our goal is to go further into software, but for the right company we would be thrilled to do a deal.

For one, we will always have about 10-15% of our revenue be professional services and so we have to level that team up and add expertise at scale – adding a well-run org of 5-10 folks at once is better for us than spending a year stringing it together ourselves. Second, we need to bring in groups of customers from industries we don’t currently serve so that we can expand faster but do it right. Third, we eventually want to have an MSP-friendly product so I’d love to incubate that with an-house traditional MSP.

If you’re an MSP doing $2-3 million in recurring revenue with an awesome team, and you want to join forces with us to take this market over together then we should talk!

ChannelE2E: Any closing thoughts before we wrap this interview?

Denehy: I’d like to give a big “thank you” to everyone in the managed services industry who has helped us up until this point. I’ve worked in a lot of different industries but I have to say that the people in this industry are absolutely the best. Down to earth, helpful (even when there’s nothing in it for them) and always looking for new solutions. At the end of the day we’re not here to put anyone out of business – 70% of our customers didn’t have an MSP before we called them. We’d like to become the large national player but find ways to send lucrative deals to the channel as well. If you have ideas, let’s talk!

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