AppDirect Raises $80 Million for AppSmart Invest Program, Courts Partners

Subscription commerce provider AppDirect has announced $80 million in funding that will go to channel partners of its AppSmart division.

San Francisco-based AppDirect received the funding from Caisse de dépôt et placement du Québec (CDPQ), which handed AppDirect $185 million in 2020. The new $80 million will expand the AppSmart Invest partner funding program in addition to help establish an overarching funding arm named AppDirect Capital.

AppSmart earlier this year unveiled its Invest program, which provided technology adviser firms with upfront and recurring capital without taking any equity away from them. A total of $45 million went to 11 different partners, according to chief marketing officer Adam Christensen. Members include Global Communications Group, Netstar Communications and On Track Communications.

Christensen said AppSmart intends to expand its list of participating firms with the additional $80 million.

AppSmart’s Adam Christensen

“[The goal] is very much to bring in more Invest partners across a broader spectrum,” he told Channel Futures.

Christensen said CDPQ’s funding varies considerably from what it has done in the past with AppDirect. While the rest of AppDirect’s $400-plus million investments have gone to strengthen the company itself, he said the new $80 million functions as a “pool of money” for the channel.

“It’s not an equity thing; it doesn’t change our evaluation. It’s not an investment in AppDirect; it’s a joint investment in the technology channel,” he said.

AppSmart Invest

Christensen said Invest members fall into three different buckets, though all sport a growing recurring revenue business. The first group will use the funds to double down on their existing business model. The second group spins up new business endeavors. The third group uses Invest as an opportunity for an exit, according to Christensen.

Program members make the AppSmart marketplace their lone platform for brokering technology. The exclusivity does not apply to their subagents or to solutions that AppSmart doesn’t offer. However, Christensen said the Invest program is helping to enlarge AppSmart’s ecosystem.

“The point of this is really kind of consolidating business and growth with AppSmart,” he said.

Christensen differentiated the program from the many agent rollups that are occurring in the space. Upstack, for example, has acquired more than 15 consultancies through the backing of private equity firm Berkshire Partners.

“We’re not like a PE trying to roll up a bunch of channel partners. This is really about getting that money to invest in their growth,” Christensen said.

Partner Perspectives

Mark Venuto is chief revenue officer for Ohio-based US Network. The firm met with AppSmart in early 2020 to learn about the funding program.

“We were very intrigued after our first meeting, and we continued our conversations — as I am truly glad we did. US Network was one of the very first AppSmart Invest partners,” Venuto told Channel Futures. “This truly allowed us to change the way we were doing business and expand with a very rapid growth pace. AppSmart is an amazing company with a brilliant executive leadership team that will truly change the overall view and landscape of the entire indirect/MSP channel.”

Venuto has shared that US Network’s partnership with AppSmart led to it going back into its existing customer base to …

… sell security solutions it previously hadn’t sold.

Dallas-based NXTSYS Consulting announced its participation in May. The funding from AppSmart allowed NXTSYS to pay off its previous investor and give its CEO and vice president of sales full equity in the company.

Moreover, NXTSYS’ leaders saw Invest as an opportunity to launch a new business focused on extended reality solutions.

NXTSYS’ Dave Wallace

“AppSmart Invest has been a complete game changer for us, allowing us to double down on our growth while keeping 100% ownership and control of our business,” NXTSYS president Dave Wallace said. “The investment has also allowed us to fund the development of an entirely new business that we believe will be transformative to our future.”

AppDirect Capital

Daniel Saks, co-founder and co-CEO of AppDirect, said AppDirect Capital will provide partners “hassle-free access to funding that enables them freedom to grow their business on their terms.”

AppDirect’s Dan Saks

“Our growing network of technology advisers has seen unprecedented demand for cloud and connectivity in recent years. With the launch of AppDirect Capital, we will be able to bolster our AppSmart Invest program while building a catalog of financial products to help advisers grow and scale their business,” Saks said.

Martin Laguerre, CDPQ’s executive vice president and head of private equity and capital solutions, said a “high-value client base” uses AppDirect’s platform.

“With this new investment, CDPQ’s focus on performing technology-driven companies that accelerate the competitiveness of today’s businesses is magnified by our ability to deliver innovative and flexible alternative financing as part of our capital solutions strategy,” Laguerre said.

CDPQ’s Martin Laguerre

Christensen said other programs will come out of the AppDirect Capital portfolio.

CDPQ functions as an active AppDirect shareholder.

“As a long-term partner who supports promising technology companies at all stages of maturity and across asset classes, this complementary investment in the AppDirect Capital program reflects CDPQ’s conviction that new technology business models, such as subscription-based services and platforms, can fuel and sustain performance over the long term,” Alexandre Synnett, CDPQ’s executive vice president and chief technology officer.

Background

AppDirect has been making waves in the agent/broker channel since announcing its acquisition of WTG three years ago. The company bolstered its indirect sales footprint through the acquisition of multiple brokerages/distributors, including Telegration, CNSG and MicroCorp. AppSmart’s portfolio includes legacy connectivity solutions associated with the traditional agent channel as well as security, SaaS applications (like DropBox) and energy.