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Kaseya’s Potential IPO: Call It A Milestone, Not An Exit

Kaseya is ramping up for a potential IPO (initial public offering). But if the event happens, don’t call it an exit. Instead, mark it down as a business milestone — a point in time that’s part of a longer, ongoing business journey.

Fred Voccola, CEO, Kaseya

That’s the message from Kaseya CEO Fred Voccola. Indeed, the IT management and business automation software provider is performing well during the coronavirus pandemic, according to business and financial metrics Voccola shared during a recent ChannelE2E conversation. And in the event of an IPO, Voccola and the Kaseya executive team will remain in place to run the company post-IPO, he adds.

Among the key Kaseya business and financial metrics Voccola shared:

  • The company will grow more than 20 percent organically in 2020, and the final figure might be even higher by the time Kaseya wraps up the year.
  • Annual EBITDA is on pace to exceed $100 million.

Among the areas Kaseya may look for further growth is the Asia-Pacific region. Japan is the second largest Microsoft Windows market in the world, Voccola notes. To the best of ChannelE2E’s knowledge, none of Kaseya’s primary MSP software rivals have major footprints in that area.

How might Kaseya expand its own footprint in Asia? The short answer may involve TPG Capital — a private equity firm that made a minority investment in the company in May 2019. TPG, Voccola notes, has a huge network of activity in Asia.

Multiple Financial Events?: Kaseya, Rivals and Wall Street

If a Kaseya IPO occurs, the target timeframe appears to be 2021 or so.

Still, the road to an IPO can be a tricky path to navigate. Private equity firm Insight Partners acquired Kaseya in 2013. The first year or two involved multiple executive transitions and inconsistent performance at the company. Voccola arrived as CEO in 2015, stabilized the business, doubled down on MSPs, and returned the company to growth.

Fast forward to present day. In addition to monitoring Kaseya’s own business dashboard, Voccola and the executive team must navigate the modern coronavirus economy — where certain economic regions and business sectors can shut down with little to no notice. So far, Kaseya is navigating those unpredictable variables well, the company’s financial results so far in 2020 affirm.

Still, Kaseya’s IPO ambitions aren’t unique. Rival Datto is also ramping up for a potential IPO, and SolarWinds MSP may spin out of parent SolarWinds as its own publicly traded company.

Kaseya Acquisitions: The List So Far

To compete against those and other rivals (for example, ConnectWise), Kaseya has spent recent years expanding beyond its core RMM (remote monitoring and management) software. The journey has blended organic R&D with acquisitions — some of which were quite successful.

Key deals to note include:

  1. Graphus for anti-phishing security technology.
  2. ID Agent for dark web monitoring.
  3. IT Glue for MSP documentation software.
  4. RapidFire Tools for network, security and compliance assessments.
  5. Spanning for SaaS application backup.
  6. Unigma for cloud cost management.
  7. Unitrends backup and disaster recovery.
  8. Vorex for PSA (professional services automation) software.

(Side note: Did we miss any deals?)

If I had to personally rank those acquisitions, I’d say…

  • Big Wins: IT Glue, RapidFire Tools and ID Agent were strategic wins and blue ocean opportunities for Kaseya’s MSP partners, I believe — though some partners and rivals were upset about Kaseya’s delayed disclosure of the IT Glue acquisition.
  • Mixed Outcomes: Vorex (PSA) was a win for some MSPs, but overall I think Kaseya underestimated how difficult it is to build market share in the PSA software market, where ConnectWise and Datto’s Autotask are entrenched. The situation is somewhat similar for Unitrends, which has evolved from its corporate IT focus to include MSP-centric storage features but also faces strong, entrenched competition.
  • Still Watching: The Graphus deal is only a few weeks old, though I suspect it will be a winner given its market focus. MSPs have an urgent need for proper phishing risk mitigation. Spanning arrived in 2018 and certainly faces competition, though the SaaS backup market is a fast-growth opportunity. Also, I haven’t heard if or how Kaseya unlocked the full promise of Unigma, an early mover in the fast-growing cloud cost management market.

Software Integrations – A Closer Look

Admittedly, M&A deals can often suffer from incompatible code bases, and so-called “Franken Monster” products that are bolted together instead of truly and deeply integrated. For those who’ve been around awhile, Novell’s 1994 buyout of WordPerfect and Quattro Pro comes to mind as a Franken Monster failure.

Kaseya, in stark contrast, has built an underlying software architecture that features an integration hub, Voccola says. Instead of integrating dozens of software products to one another in a daisy chain approach, the integration hub is more of shared approach for the company’s products. Each time Kaseya acquires or develops a new product, it can leverage the software hub for fast, repeatable integrations across multiple products, Voccola says.

It’s sort of like Microsoft sharing a spell checker plugin across Microsoft Word, Excel, PowerPoint and more. Instead of writing that spell checker code from scratch for each new Microsoft application, it’s a shared resource that can be integrated into all of the company’s applications.

For Kaseya, the hub’s net result is faster, more reliable, deeper integrations that don’t break each time an application is upgraded, Kaseya asserts. Anecdotal evidence suggests Kaseya’s software hub is generating results. Recent integrations include:

  • Kaseya Compliance Manager can now create tickets directly in Kaseya BMS.
  • A Unitrends MSP Backup to IT Glue integration provides Backup Coverage Reporting to ensure that all managed devices are backed up on a regular basis.
  • A RapidFire Tools Network Assessment Module (NAM) integration to Unitrends MSP allows partners to perform gap analyses and prospecting reports to potentially increase MSP backup sales.
  • A Graphus to ID Agent BullPhish integration allows BullPhish ID customers to provision Graphus’ automated phishing defense solution to deliver comprehensive anti-phishing protection.

Amid all those products and integrations, Kaseya’s overall goal is to deliver multi-function IT solutions in one box for MSPs. Unlike corporate IT departments — which are filled with application, security, network and other types of specialized IT pros — the typical MSP service desk technician needs to understand all of the services rollout out to customers. The Kaseya “multi-function IT in a box” approach solves for that MSP need, Voccola says.

IPO Is A Goal, But Not A Guarantee

No doubt, Kaseya is ramping up for an IPO. But will the company achieve that particular business milestone?

I do believe that’s the intended direction. But my personal belief, based on my experience covering the IT sector for a couple decades, is that the company could also get acquired. Potential suitors now have a pretty good feel for the privately held company’s growth rate, profit margins and business performance. Those metrics could inspire M&A inquiries from potential suitors, I believe.

Still, the official word from Voccola is a march toward that IPO target. Just be sure to call it a milestone rather than an exit — since Voccola plans to stick around and to continue building Kaseya beyond the potential IPO day, he tells ChannelE2E.

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2 Comments

Comments

    Dimitris Miaoulis:

    Kaseya’s vision, roadmap and leadership from Fred are all heading in the right direction. This coming from an MSP on the front lines for 23 years. I hope the “money people” don’t lose sight of the long term upside for the MSP industry and their clients and what Kaseya has been moving towards. It would be a shame not to see this vision, this road map, completed.

    Joe Panettieri:

    Hi Dimitris: Thanks for your readership and comment. We’ll continue to track how Kaseya and the broader MSP technology industry navigate financial markets, and the associated implications for MSP partners.

    Best,
    -jp

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