ConnectWise has appointed longtime Tech Data CEO Steve Raymund to its board of directors to in part help the company evaluates options for outside financing.
The Tampa, Fla.-based IT service management vendor said Raymund would help ConnectWise think through the pros and cons associated with an initial public offering, taking venture capital funds, or borrowing money from the banks, according to Arnie Bellini, ConnectWise's CEO. Raymund took Tech Data public back in 1986 and chaired the company's board of directors from April 1991 until this June.
"ConnectWise is on a tear," Raymund said. "They're growing. They have every avenue of finance available to them. And they're being courted by everybody and anybody from a capital-raising standpoint."
ConnectWise is 100 percent employee-owned, with co-founders Arnie and David Bellini – currently president and managing director of ConnectWise International – each holding a significant stake in the firm. It is the only one of the major IT service management vendors not to be majority-held by a private equity firm.
Thoma Bravo has owned Continuum since June 2017; SolarWinds, the parent of SolarWinds MSP, has been owned by Thoma Bravo and Silver Lake since February 2016; Vista Equity Partners has held Autotask since June 2014; and Insight Venture Partners acquired a controlling interest in Kaseya in June 2013.
"When I look at our competitors, I believe that their venture capital is preventing them from being innovative and preventing them from doing the proper research and development to be relevant in the future," Bellini said. "Venture capital has different incentives and different focal points that create decisions in the board room that may or may not be the best long-term decisions for a company."
ConnectWise today has zero venture capital, zero debt and a monthly free cash flow in excess of $1 million that can be allocated toward investments, Bellini said. At the same time, Bellini said ConnectWise has $40 million to $80 million of bank financing that could be put in place, and has already assembled a syndicate that could take the company public at any time.
But Raymund (pictured) has helped ConnectWise realize that the company doesn't need to make a capital-raising decision right away since the company is generating its own free cash to the bottom line doesn't have a viable list of acquisition targets that would stretch the company past what it could finance on its own, according to Bellini.
"Access to capital is in no way, shape or form an issue impeding this company's growth," Raymund said.
Being employee-owned has enabled ConnectWise to focus its investments on what's best for the company over a time horizon of five-to-fifteen years, Bellini said. In contrast, Bellini said venture capital firms are typically looking to exit their investments within four years, and are therefore more focused on what companies are doing right now to create immediate value.
"Because we don't have to focus on that [venture capital], we're investing in the research and development and making bets that will be great for our customers," Bellini said. "And we never have any sort of gate that we have to go through to be able to do that."
Raymund and Stan Levy – a former senior leader at audit, tax and advisory firm Grant Thornton – will be the first non-employee directors to ever sit on ConnectWise's board. Since ConnectWise is employee-held, Raymund said he serves at the pleasure of the CEO in a primarily advisory capacity rather than selecting the CEO himself like he would as the director of a publicly-traded company.
"Arnie is completely unconflicted," Raymund said. "Everything that's good for the company is good for Arnie. Sometimes when you have a public CEO, it's different."
Raymund joined Clearwater, Fla.-based Tech Data back in 1981 when it was primarily a reseller of data processing supplies and grew it into a $21 billion global distribution powerhouse by the time his 20-year tenure as CEO concluded in 2006. Bellini credited Raymund for putting Tampa Bay on the map as a destination for companies and employees looking to work in technology.
"When Steve started Tech Data here, this was just a little bit more than a cowtown," Bellini said. "I call Steve the godfather of technology in Tampa Bay. He doesn't necessarily like it when I call him that, but it is the truth."