VC Firm Greenspring Associates Leads $40M Investment in MSP Electric
… delivering managed services to SMBs. Expanding automation with AI and bots will let Electric provide lower cost services to SMBs by reducing human interaction. To that end, Electric will also invest in delivering more lower-cost solutions that don’t require expensive labor. The cost of labor to deliver services is a key reason why SMBs don’t use MSPs, Denehy added.
“One of the reasons why 80% of small businesses have never worked with an MSP is because when the whole model is based on labor, you have to sell a high-priced product to support the headcount going into it,” Denehy said. “For us, as we build more software, we will create lighter weight offerings, that any business can use to dip their toe in to begin their journey with a managed services solution that don’t necessarily involve, as large of a commitment.”
The focus on SMBs was a key factor for Greenspring, according to Sommerville, the general partner.
“We think they offer a lot of value to SMBs and companies that are oftentimes underrepresented or underserved,” he said.
The COVID-19 Effect
Like many IT providers and MSPs, the increase of remote work resulting from last year’s pandemic affected Electric. Initially, business slowed as businesses paused, but it suddenly spiked last June.
“I think once businesses realized that the world wasn’t ending, companies looked around and said, ‘IT is really important,’” Denehy said. “COVID ended up creating a bigger need for what we were doing.”
Electric had just closed on a $14 million investment right before governments ordered businesses to shut down.
“The money landed in the bank on the Friday before the Dow dropped 2,000 points on the following Monday,” Denehy recalled.
While that didn’t change how Electric used the funds, the effects of the pandemic resulted in higher costs. Electric’s investors supplemented that round with an additional $7 million.
While Electric does provide on-site services directly and through partnerships with other MSPs, managed services account for more than 80% of its business. Since the pandemic began, Electric has seen increased demand for services to enable remote work from home. Demand for Microsoft Teams and Slack are notably high, Denehy said. Among Electric’s key alliance partners are Apple, Jamf, Kaseya and Microsoft. Cisco Meraki and Ubiquiti are also key partners for wireless LAN infrastructure.
VC Investor Confidence
Existing investors Bessemer Venture Partners, GGV Capital, 01 Advisors and Primary Venture Partners also participated in this week’s round. Besides Greenspring Associates, new investors include Atreides Management and Vintage Investment Partners.
Somerville said Greenspring Associates also decided to lead the latest funding because of Denehy and his management team.
“We were just blown away by Ryan, his leadership capabilities, the culture that he’s built and the high-quality people that he surrounded himself with,” Somerville said. “He has really built a management team that I would say is public-market ready even before he needed to do so.”
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