MSP Electric Closes $40M Funding Round, Turns Eye Toward Acquisitions

‘We’re on the hunt to do one or two more M&A deals similar to the one we did with SINU. We’re looking for companies with similar profiles to SINU: profitable, $1 [million] to $5 million in annual recurring revenue, and strong technical expertise. If we find people who believe in our mission, we want to talk with them,’ says Electric CEO Ryan Denehy.

MSP Electric Tuesday said it has closed a new round of venture capital funding to the tune of $40 million as a way to expand its R&D, sales and marketing capabilities and finance its hunt for more acquisitions.

Electric, which late last year made its first acquisition with the purchase of SINU, is definitely looking at using part of its new funding to do more acquisitions, said Ryan Denehy, CEO of the New York-based company.

“We’re on the hunt to do one or two more M&A deals similar to the one we did with SINU,” Denehy told CRN. “We’re looking for companies with similar profiles to SINU: profitable, $1 [million] to $5 million in annual recurring revenue, and strong technical expertise. If we find people who believe in our mission, we want to talk with them.”

[Related: Selling An MSP Business? Here’s Everything You Should Know]

This is a great time for MSP owners looking to exit, given how much money is becoming available for acquisitions in the channel, Denehy said.

“We are different,” he said. “Almost every company out there acquiring MSPs are looking to gobble them up to grow, or they’re private equity funds. We’re looking to grow our business to take advantage of our software. We’re not just some other MSP gobbling you to grow, or some private equity team coming in to tell you how to do your job.”

Because Electric has venture capital backing instead of private equity backing, its investors are playing the long game, Denehy said.

“They’re not looking three to five years down the line. They’re investing in our growing and becoming a long-standing business,” he said.

“MSPs are businesses with recurring revenue, which is very appealing and predictable,” he said. “They offer a service businesses need. And they’re profitable. And they’re often owned by one or two people. And broadly, MSPs will become more generally accepted. In the future, people will stop paying their landlord before they stop paying their MSP.”

With this new round of funding, led by Greenspring Associates along with existing investors including Bessemer Venture Partners, GGV Capital, 01 Advisors and Primary Venture Partners, Electric has raised a total of over $100 million.

Electric, which in addition to offering managed services develops proprietary software that integrates with Slack and Microsoft Teams to provide automated support without the need for old-school ticketing, started in 2017 with four customers and 200 end users, Denehy said.

“We now have 450 customers with 25,000 end users,” he said. “We plan on doubling again with the help of this funding.”

Outside potential acquisitions, about half of the new funding is slated to go to R&D and half to sales and marketing, Denehy said. Electric expects its capital to last for several years while it invests in growth, he said.