After AppDirect Sale, TBI, Shepstone Reckon with Layoffs Fallout
… for years.
“The overall sentiment on employees is they are and were being strung along the last couple years [by promises] of a potential payout or seed money, with a potential acquisition,” a former TBI employee told Channel Futures under the condition of anonymity. “Leadership insisted that they would have it in writing, but to no avail. Most of the folks, it would appear, didn’t get anything.”
Payout Promises?
For some sources higher up on the org chart, promises of a generous payout seemed too good to be true from the start. But many employees, especially younger ones who joined TBI straight out of college and had only ever worked for that company, didn’t know any better.
“If anyone promises you equity, get it in writing,” one source said.
Many TBI employees in vice president roles did receive a payout — 14, according to reports. But other vice presidents, many of whom joined the company in recent years, lost their jobs in the workforce reduction. Laid off members of the executive team included vice president of marketing Anne Mitchell, senior vice president of strategic partnerships Scott Whalen and senior vice president of global sales Brandon Smith.
[Editor’s Note: An earlier version of this story incorrectly stated that vice president of partner and supplier experience Samantha Zuniga was laid off. She resigned from her position in December.]
Multiple sources told Channel Futures that Shepstone had every intention of giving everyone the payouts he had mentioned. And that sentiment fits well with the picture of Shepstone as a business owner who very much wanted to see all of his team succeed. The problem, according to sources close to Shepstone, was a drastically smaller price tag that TBI earned from AppDirect, which set much of the fallout in motion.
But former TBI employees reiterated to Channel Futures that Shepstone had nonetheless made promises to them. And they had staked their livelihoods to those promises.
“These decisions, or lack thereof, whether it was out of malice or ignorance, still affect employees and partners,” a former TBI employee said. “Neither are a factor in stringing employees along. Some folks that have been there for 14 years and strong contributors to the bottom line, got nothing, whereas an employee who’s been there for less than five years and wasn’t in a revenue-impacting roll, got a payout. This speaks to the favoritism and politics that were so detrimental.”
A Different Valuation
A source with intimate details of the transaction noted that Shepstone “still paid out millions” to different employees.
And many of the laid-off employees, the source said, probably wouldn’t have stuck around as long at a different company. Shepstone reportedly had refused counsel to trim his workforce over the years. On one hand, he felt loyalty to his employees, and his diversified business portfolio meant that he didn’t feel any pressure about squeezing TBI’s margin, according to a source.
“Geoff was a relationship guy and valued old-school Midwestern values. He wasn’t aggressive in shaking down vendors for MDF funds, and he wasn’t aggressive in keeping a lean payroll,” the source said.
But it was that “Midwestern” mentality that did not align closely to the interests of strategic buyers, the source said.
“The industry has evolved now to where margins have shrunk. The modern channel today requires much more aggressive style than the way Geoff operates,” they said.
The Rise and Fall
Ten years ago, TBI was playing at the top of its game. The company raked in a $1 million bonus from CenturyLink for growing its business with the company by more than $2 million monthly over the course of five years. CenturyLink had required agents to complete the task within five years; TBI had done it in three. Then it performed the feat again in 2014.
The company had earned a reputation for its back-office management that stood out in a world of tedious telecom vendor processes. In addition to its accomplishments with CenturyLink and later Lumen, a brand it transitioned to in 2020, the TSD has earned numerous accolades from AT&T and other ILECs and developed a reputation as one of the stronger TSDs in the area of mobility.
In the eyes of many, TBI and California-based rival Intelisys were fighting neck-and-neck for leadership in what was then known as the master agent channel. Telarus had not yet acquired VXSuite and CarrierSales; cross-town rival Avant was only four years old and TCG had only just started to see a resurgence under Dan Pirigyi.
TBI in 2013 stated that it was making more than $30 million in annual revenue with more than $10 million in monthly billings, according to a Channel Futures article. And by all accounts, the growth continued. The company reported a 25% compound annual growth rate (CAGR) from 2014 through 2018. That came in part from big gains on the SD-WAN, UCaaS and CCaaS fronts to complement its existing strengths with the ILECs.
TBI, which was founded in 1991, represented one of the oldest players in the space and seemed like one …