More Investors Move Into Managed Services Market

Roughly twice per week, I hear from a potential investor or suitor who’s looking to make a move in the managed services market. The latest note to hit my inbox comes from Technology Capital Investors, a New York-based firm that focuses on “MSPs that offer cloud-based services or are looking to build out a cloud-based infrastructure.” Considering the cloud craze that’s a pretty broad definition.

So why am I mentioning Technology Capital Investors here, and remaining silent on a few other investors who have contacted me? The simple reason: Technology Capital Investors seems to be transparent — and I mean that in a good way. The company clearly lists its management team, which includes financial and technology veterans who previously worked at Paine-Webber, Novell and US Internetworking. The company’s leadership also has ties to OS33, and recent investments apparently include Avazpour Networking Services (PDF link is a press announcement) and D&D Consulting (also a PDF link).

I’m not endorsing Technology Capital Investors. The company could experience conflicts of interest since OS33 — an MSP software provider — is assisting the effort. But here’s the point: At least the company is transparent about who’s doing what. In stark contrast, I’m surprised by how many people call me and ask me to promote their investment operations — but request that I don’t mention any company officials by name. Sure, many of the callers may run legitimate investment businesses. But when you take managed services and combine it with the cloud computing craze you also attract pretenders and scammers who are looking to make a fast buck in an industry they may not understand.

Frankly, the managed services industry needs more transparency: Who represents whom? What motivations does an investor bring to the table? What outcomes can MSPs expect post-investment? We’ve heard a lot about MSP mergers and acquisitions. But the media (including MSPmentor) has to do a better job re-visiting recent M&A deals to determine how they played out — who ultimately won, who lost and why.

I don’t know where all the MSP M&A activity will lead. I think companies like Technology Capital Investors will have a difficult time finding MSPs that are still building out their own cloud-based infrastructure. There certainly are some examples of MSPs building their own clouds. One recent example involves ScaleMatrix. Still, it seems like more and more small, regional MSPs plan to leverage public cloud infrastructure and SaaS relationships with channel-friendly companies.

Can Technology Capital Investors find unique MSPs pushing into the cloud space? We’ll be watching.

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