Electric, a New York-based MSP that blends organic software development with third-party automation software, has raised $40 million in Series C funding. The round's valuation was not disclosed.
Greenspring Associates led the round, with participation from existing investors including Bessemer Venture Partners, GGV Capital, 01 Advisors and Primary Venture Partners, and new investors Atreides Management and Vintage Investment Partners. Electric has now raised more than $100 million since the company's launch in 2016.
The big question: Why does an MSP serving small and midsize businesses want or need to raise money? The answers involve organic software development that will increasingly extend self-service IT capabilities to end customers; expansion of sales and marketing; and potential acquisitions. (If you're an MSP looking to sell, reach out to Electric CEO Ryan Denehy.)
Take a closer look at the funding announcement, and you'll notice that Electric also emphasizes a commitment to expanding its diversity programs as well as continued philanthropic efforts.
Electric's Funding: MSP Growth and Next Moves
Admittedly, putting Electric's growth and financial performance in proper perspective can be challenging since the privately held company does not disclose actual revenues or profit figures. But anecdotal evidence suggests Electric has momentum. Among the items to note:
- From 2018 to 2020, annual recurring revenue grew by 525%;
- revenue and headcount nearly doubled in 2020 vs. 2019;
- the MSP supports more than 400 customers and more than 20,000 employee end-users;
- the MSP employs more than 100 IT technicians; and
- Electric acquired Sinu, another New York MSP, in late 2020.
Instead of competing head-on to win customers away from rival MSP accounts, Electric is winning organic business with customers that did not previously embrace managed services, Denehy tells ChannelE2E.
The true business opportunity for Electric, he says, involves the 80 percent of small businesses that don't have an MSP in place. Selling to those types of businesses was difficult a decade ago. But the overall SMB market is rapidly shifting towards an MSP-friendly mindset, since digital natives (i.e., owners and executives who grew up with smart phones, apps and the cloud) are now in positions where they control SMB IT buying decisions, Denehy says.
The evidence? Roughly 70 percent of Electric's business wins in 2020 involved customers that had not previously worked with an MSP, Denehy adds.
So what's next? Watch for Electric to build and offer IT services that are easier and easier for customers to consume. Instead of forcing expansive solutions on customers, Electric sees an opportunity to offer multiple fine-tuned options to customers -- some customers may chose a service desk, others may opt for monitoring, and so on.
In addition to its own software development, Electric partners with multiple software companies and technology platforms -- including Apple, Jamf, Kaseya, Cisco Meraki, Microsoft Teams, Slack and Ubiquiti Networks.
Electric's Funding: Executive Perspectives
In a prepared statement about the funding Denehy said:
“We couldn’t be more excited to start the next phase of growth backed by Greenspring Associates, an ideal partner who wholeheartedly believes in our vision. As eager as I am to continue product development and the expansion of our vertical expertise, I’m just as committed to investing in the Electric team and our efforts to do good.”
Added Hunter Somerville, general partner at Greenspring Associates:
“The abrupt shift to remote work forced companies of all sizes and stages to take a hard look at their core pillars like IT. In order to maintain productivity, security and business continuity outside the physical office, a solution like Electric’s is a game-changer. We’re thrilled to put our support behind the team and its technology during a time when it’s most needed.”