Kaseya's business grew 40 percent in 2017, and the MSP-centric software company is positioned for at least two "industry-shattering acquisitions" in 2018 along with a march toward a potential IPO, CEO Fred Voccola tells ChannelE2E.
Kaseya is best known for its VSA software -- an RMM (remote monitoring and management) platform for MSPs and midmarket IT departments. But the company spent 2017 doubling down on additional software offerings -- which drove overall growth more than 40 percent. Among the milestones: Kaseya now has attracted more than 1,000 MSPs onto its PSA (professional services automation) platform. No doubt, rivals ConnectWise and Autotask (now part of Datto) have much larger PSA installed bases, but Kaseya is relatively new to the market, so the 1,000 mark is worth noting.
Still, the MSP software market has evolved beyond PSA-centric brawls. Most of the major players -- Kaseya, ConnectWise, Continuum, Datto and SolarWinds MSP, among others -- now offer business management, automation, monitoring and data protection suites for partners. Kaseya also has been evolving in that direction -- acquiring Unigma (cloud management) in 2017, while reinvigorating earlier acquisitions like Traverse (infrastructure monitoring) and AuthAnvil (identity and access management) and launching a new benchmarking tool called MSP Insights.
Kaseya: Two Acquisitions and a Potential IPO?
Plus, Kaseya appears poised to launch more services for MSPs, perhaps through acquisition, in the next few months. Rewind to September 2017, and Voccola said three potential acquisitions were brewing. By November 2017, the company had raised somewhere between $22.5 million and $45 million for business expansion. Now, Voccola says Kaseya is prepared to make "two industry-shattering acquisitions in 2018. They're big deals. Our customers will love them."
If I had to guess, Kaseya would like to unveil at least one of those deals during or before Kaseya Connect 2018, a customer and partner conference set for May in Las Vegas. At the same time, Kaseya will work closely with an auditor in 2018 to explore a potential IPO, Voccola says.
Insight Venture Partners, a private equity firm, has owned Kaseya since June 2013. Generally speaking, private equity owners typically have five-year investment horizons for their portfolio companies. So some sort of Kaseya financial event seems likely in late 2018 or 2019, at least in my mind. (PS: There's growing chatter that SolarWinds -- parent of SolarWinds MSP -- may also be pursuing an IPO sooner than most pundits previously expected...)
If I had to guess, Kaseya will get acquired by a strategic buyer or a larger PE-owned IT management company rather than IPO. That hunch is based purely on my own experience tracking MSP software companies, and the challenges they've faced pursuing IPO dollars. And remember: I don't know Kaseya's actual revenues, profit figures or profit margins, so perhaps I'm wrong about my M&A vs. IPO hunches.
Kaseya: What's Driving Growth?
Even without knowing those actual dollars-and-cents figures, the anecdotal information -- 40 percent growth in 2017 -- suggests Kaseya has regained momentum after experiencing challenging ownership and executive transitions back in the 2013 and 2014 timeframes.
Voccola, often an outspoken critic of his rivals, didn't take any swings at the competition during our call. Instead, he credited SMB business priorities, compliance mandates like GDPR, savvy MSPs, and Kaseaya's employees for accelerating the company's business. Much in the way that enterprises bet the house on IT in the 1990s, SMBs are now accelerating their IT spending to address growth opportunities, he asserts. "We're lucky and we're fortunate to be in this market, and we're only in the third-inning" of accelerated SMB spending on IT, he predicted.
Moreover, Kaseya grew in 2017 because MSPs are finding it easier-than-expected to shift PSA platforms, and MSPs are also moving fast into end-user security and network monitoring, Voccola asserts. I definitely agree with him regarding the security and monitoring points, but I always question the ease of PSA migrations. Much like swapping out a CRM or financial management system, PSA tends to be a very sticky, deeply embedded application for MSPs. Still, Kaseya has attracted 1,000 MSPs onto its PSA platform, which certainly is a milestone I can't debate.
Kaseya also is seeing a healthy mix of mature, large MSPs along with upstart MSPs moving onto its platforms, Voccola adds. No doubt, M&A within the MSP sector has also been strong across Kaseya's partner base, he says. And Voccola expects more private equity money to flow towards MSPs -- especially since many of the major software providers in the sector have attracted PE dollars. That PE-MSP software connection now "validates a lot of PE money going into service providers."
Overall, Voccola sounds upbeat. But he concedes the market has challenges -- including the tight labor market. But there again, a silver lining emerges: The tight labor market is one of the reasons midmarket enterprises and SMBs increasingly outsource their IT needs -- especially security -- to MSPs. Kaseya and its core rivals continue to benefit from that trend.
