Upstack Channel Chief: 'Not All Investment Vehicles Are Built the Same'
Upstack hired Intelisys and Pax8 alumna Danielle DeCosta to lead supplier development.
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Channel Futures: Why did you join Upstack, and how did your past experiences set you up to be here?
Upstack’s Nicholas Caruso: Most recently I was senior vice president of global channels and alliances at Zayo, so in the supplier side of the business. Great organization. I was there for years – love those folks. And I had met [Upstack founder and CEO] Chris [Trapp], just because there was so much buzz about what Upstack was doing. We were working on alignment on the supplier side. Lo and behold, he and I stayed in touch. And over time, there was an opportunity to lead a division of the company here at Upstack. I had a great thing over at Zayo. But Chris spent the time with me to kind of illustrate the vision.
Everybody uses the words “disruption” and “transformation,” but he was actually doing it right. It was the first time in a long time I could see in our space that somebody was creatively thinking about how to go ahead and invest in our channel and do something that hadn’t been done before. We spent a considerable amount of time trying to figure out where I would fit in the organization. And the net result of it was that I believe in the agents; I believe that the investment that we’re making is not only significant, but it’s important, because we’re helping a lot of these entrepreneurs go ahead and leverage not only the investment capital we have, but the technology platform, the customer experience and the support. And at the end of the day – and this is not to speak ill about anybody – there are a lot of plays in our channel. This is by far the most interesting – the one that I think has the greatest ability to over a period of time turn into a success. And I wanted to be part of the journey. So that’s why I made the decision.
CF: Normally, I’m talking to channel chiefs from companies like Zayo or other vendors. What does that role look like at Upstack?
NC: A little bit different. My title here is head of channels and alliances. I have partner development. All of the care support that we do from a partner development side lives in my organization. But also supplier and vendor development. Our relationships with master agents and suppliers roll into my organization. I have sales operations. Then I also do a little bit of the merger/acquisition work with Chris [Trapp] and Ryan [Chorazy]. Then one last piece of it, which we’re building out right now, is the solutions architecture and solutions engineering elements of our business.
CF: Could you talk more about the developments in solutions architecture and engineering?
NC: It’s in its infancy. We’re growing really, really rapidly. As an organization we’re going extremely fast. So to sell for some of the asks from our advisers, we’re rethinking and reimagining how we can put resources in place to create the best adviser and customer experience. And one of those areas I think is extremely important is solutions engineering and solutions architecture. It’s in its infancy, but we’re building out: What should a solutions architecture engineering team look like? How many generals should should we have? How many subject-matter experts across a wider portfolio or across the stack should we have? And anybody who’s built out teams like this knows there are varying ranges of compensation. So you’ve really got to identify the key players to build out that team. And that’s where we are right now. My hope is sometime in early 2022 we’ll have a well-established engineering and architecture team.
CF: Where’s Upstack in terms of inorganic growth? What’s next in terms of M&A?
NC: That’s what everybody wants to know. Not to be too boring, but we continue to execute on the business plan. We’re investing in the top agents and agencies in our space. And that was really the genesis of the investment thesis originally. That and the expansion of our platform, our technology and our customer support. That remains and has not changed in the vision for what we’re doing. I think it’s interesting because there are all different kinds of agencies who are interested about the investment that’s in our channel. And I think what we’re doing is being extremely discerning. For organizations that are looking at simply selling the business, I think there are options out there for organizations like that.
Where we differentiate is, we have a financial model that really looks at the opportunity to maximize the investment that we make in our partners. The alternative to that, however, is if a partner was looking, for instance, for Upstack to enable them to diversify their business risk, but also provide assurance and resource to help them grow and maximize the value of that business. That’s where we feel like we differentiate. We’re not simply buying a business and saying, “Hey, go somewhere else.” We’re looking for partners for a much longer investment. And again, they become true equity stakeholders in what Upstack is doing. Those are the kinds of people that we’re looking for, and they become really great fits. Over the last two years we’ve probably gone through process with about 100 agents; of those 100 agents, we’ve only made 15 investments? So it gives you a sense of how discerning we are when we invest in an agent, because from our perspective, we’re trying to seek out those like-minded professionals. They have to be interested in not only the economics of the deal, but leveraging our platform and really providing value for their customers. Because at the end of the day, it’s all about the customer experience. And if we can align on those things, then we want to make investments in those kinds of businesses.
CF: Is it fair to say the biggest common denominator is that they’re looking for investment but want to stay in the business?
NC: Absolutely, absolutely. If you look at where we’re investing, I don’t think we’re the kind of investment vehicle for people who just want to sell off their base and disappear. I think there can be options for that. And again – this is to be really specific – there are low financial multiples on options like that, where you can go and seek M&A to sell off your business and disappear. And that’s not what we’re looking for. We’re trying to build a company that’s going to transform lifestyle businesses into real enterprise organizations. And you can only do that if you get people aligned on the vision. And that’s back to my point about why we are so discerning about who we invest in.
CF: What’s the cadence of adviser interaction with one another? Are there regular meetings?
NC: Oh, yeah. You put a bunch of people like this together, and you never know what you’re going to come up with. The way that they’ve jelled together, that they’ve collaborated, that they’ve worked together, without even necessarily realizing it. They’re creating the best kind of culture, because they’re so like-minded. These are entrepreneurs that have built great businesses, and they want to help each other grow, because we’re all in the same boat. This rising tide lifts all boats. There’s no friction. There’s no siloing. Nobody’s living on an island. Everybody is collaborating and working together.
But to answer your question, monthly all-hands calls. My team and I have weekly calls with all of the advisers. They use collaboration tools that help them constantly and perpetually talk to one another, even things like ringing the bell as they sell. As they sell deals, they’re cheering each other on, because we’re all focused on the same thing, which is the growth of the business. And I think that’s one of the best parts about it.
CF: I’m really curious about how culture is developing at Upstack as you’re bringing together these different advisers. How are they gelling together right now?
NC: I think they’re working really well together. We have a really big focus on culture. Culture is extremely important to Upstack. You have individual entrepreneurs who are letting a company like Upstack invest in their business. They bought into the vision, and now they go from a much smaller organization to a much larger organization. And it’s important to make sure that we have the appropriate culture. We just brought on a new head of people operations and want to make sure that drive that culture.
But candidly, our advisers are heads-down. They’re driving business like they always have. Over the last nine months we scaled the company from six employees to 60 employees. That’s fast. And that’s not going to stop anytime soon. We imagine we’re going to continue to expand the size of the organization. So it’s important for us to put in a foundation that really enables the advisers to work closely together with each other and even partner on prospective opportunities. Because the skill sets are cross-functional? You may have an acquisition in a very colo/cloud-minded individual and UCaaS/CCaaS individual, and together they can collaborate and get the best outcomes for the customer. And frankly today it’s somewhat nascent, but we should be launching that really soon in full – that cross-sell opportunity between our advisers. But culturally, they work extremely well together. And it’s exciting for the entrepreneurs, because we’ve invested in them, and as we continue to build out that infrastructure, that’s only going to strengthen the platform.
CF: You also talked about cross-selling. Do you have any success stories of advisers throwing an alley-oop to each other?
NC: We have an adviser on the West Coast that we invested in that was more of a contact center and UCaaS specialist but didn’t really have a lot of expertise in the colo/cloud space. Well, fortunately, we invested in somebody else out of New York City who’s a colo expert. She ran into an opportunity and didn’t feel comfortable driving it on her own. And what she ended up doing was leveraging one of our other advisers. Lo and behold, they go ahead together and create more value for the company. They drive more revenue. But they also solved a lot of problems for the customer. And the customer took to that other adviser on the recommendation of the person they had been working with for so many years.
We have a lot of stories like that. Some people don’t think that that’s possible, but we’re creating the culture that makes it possible. We’re not putting up walls between advisers. We’re fostering the collaboration. And that’s one of the most important things, because that cross-sell opportunity, that tribal knowledge that bleeds across the cross-functional team – it’s value creation. It drives revenue, but it also creates better customer experience and integration.
CF: Are there other trends you’ve noticed in the in the last year, or that have surprised you in your tenure so far?
NC: This is probably a little self-promoting, but I think what we’re doing is a trend. I mean, is there a bigger trend in the channel right now than what we’re involved with? You have to look at what Upstack is created and look at the investment that Berkshire has put into a company like Upstack. That investment has attracted other investment. It’s becoming a trend. It’s exciting.
But at the same time, I think it creates a lot of noise. I think a lot of individuals are trying to replicate some of the mechanics that we’ve put together, which can be good and bad. It’s good because the more eyeballs we drive toward what we’re trying to do, it drives more awareness to the value that we’re creating. I think the downside is, it potentially creates a little bit of confusion, because not all investment vehicles are built the same. I think some people are built for success. I think others are maybe just noise. But for me, it’s an exciting time. We love the fact that we get to be part of this. Frankly, we’re one of the most significant parts of this new trend that’s being built in the channel. I think that is the biggest trend in our space right now.
CF: What trends do you see in terms of working with vendor and distribution partners?
NC: We just hired Danielle DeCosta. Danielle’s got great bonafides in our industry. Anybody knows her knows she’s one of the best. She’s been doing this for almost 20 years. And she’s the vice president of our supplier development team. Almost every time we sit down with a supplier, they’re like, “Listen, there’s all this excitement noise about what you’re doing. What are you doing? What is it that Upstack’s vision is?” And then once we explain it to them, they get extremely excited about our ability to drive awareness directly to the customer. And the hit rate that comes on the tail end of that – the ability to go ahead and get extremely close to the customer and win and get that flywheel spinning. But the other thing is, we’re extremely focused on driving closer partnerships with our suppliers. Danielle and I and our team are really reimagining what really successful supplier experience should look like.
I don’t want to give away too much. But I think there have been a lot of motions with other organizations in the past around what a supplier relationship should look like. And we’re trying to drive and create real return on investment or our suppliers. So when we sit down with them, the conversations aren’t simply, “Throw us some market development funds, and we’re going to throw a bunch of events.” It’s about, how do we strategically align as the organizations to create a real return on investment and value creation for you as the supplier? And there has been a lot of excitement around the way that we’re reimagining that relationship. Because suppliers at the end of the day want to get closer to the customer. The closer they get, the higher their ability is to create a win rate or hit rate. And it’s like every supplier says: “Nobody can sell what they sell better than they can.” And I think they want to get closer to that customer relationship. And we’re enabling that for them.
CF: What about on the distributor side? Danielle has Intelisys and Pax8 on her resume. What sort of insight does she bring toward relationships toward those types of companies?
NC: She brings great insights. She’s worked so many different sides of business. And from her perspective, it’s not simply about the supplier relationship, although that’s what she’s driving, but she incorporates the customer experiences and the supplier relationship. And those two together create the best kind of outcomes.
She’s driving a really unique market development fund approach to how we go ahead and engage with suppliers. I think it will be extremely differentiating and extremely valuable for Upstack as an organization. Our suppliers are excited about it; it gives us the opportunity to do something reimagined.
The other thing is, what does the customer experience look like? How does the supplier become a part of the equation, when we want to go ahead and create real customer experience? No supplier likes to be on the outside. They don’t like to be a clearinghouse for opportunities. We throw something over the wall, and then hopefully they sell it. We’re talking about real strategic partnership. And I think that’s the insights that she brings. She’s going to drive that entire program. And like I said, suppliers are extremely excited about it.
CF: Is there anything else you want to add?
NC: You had asked about any surprises that I see. What’s not surprising is, frankly it’s about time and long overdue that we’re getting the attention and investment in our space, because I think we’re extremely influential and critical to every business out there. I think what is surprising is where that investment is going. If I had to give any insights to anybody who would read this, it’s: If you’re looking at somebody investing in your business, with all of the noise out there in the M&A side, although economics has a tendency to be that big, shiny ball, it’s not simply about economics. You have to look at a business and say, “Is this company that’s willing to invest in me built to perform? Do they have the appropriate technology, customer experience and support teams to help my customer get the right kind of outcomes?” And the last thing I would say is, do they have the appropriate culture?
If you let somebody invest in your business, you’re going to go from a smaller business to a much larger organization. You’re going to have to evaluate that culture, see where you fit and make sure that whoever you allow to help you grow that business and scale has the right culture, the right technology, customer experience and support, and you feel like you’re the appropriate fit. Economics is extremely important. But it’s not the only thing making these decisions. And the last thing I would say, and this is more advice, I would advise anybody who’s looking for an organization to go ahead and invest in that, get a financial adviser, get a banker, get an attorney, do your due diligence. You’ve spent all this time building this amazing business; spend just as much time and be that as discerning about who you would let invest in your business. Make sure that they’re the appropriate type of organization.
CF: Is there anything else you want to add?
NC: You had asked about any surprises that I see. What’s not surprising is, frankly it’s about time and long overdue that we’re getting the attention and investment in our space, because I think we’re extremely influential and critical to every business out there. I think what is surprising is where that investment is going. If I had to give any insights to anybody who would read this, it’s: If you’re looking at somebody investing in your business, with all of the noise out there in the M&A side, although economics has a tendency to be that big, shiny ball, it’s not simply about economics. You have to look at a business and say, “Is this company that’s willing to invest in me built to perform? Do they have the appropriate technology, customer experience and support teams to help my customer get the right kind of outcomes?” And the last thing I would say is, do they have the appropriate culture?
If you let somebody invest in your business, you’re going to go from a smaller business to a much larger organization. You’re going to have to evaluate that culture, see where you fit and make sure that whoever you allow to help you grow that business and scale has the right culture, the right technology, customer experience and support, and you feel like you’re the appropriate fit. Economics is extremely important. But it’s not the only thing making these decisions. And the last thing I would say, and this is more advice, I would advise anybody who’s looking for an organization to go ahead and invest in that, get a financial adviser, get a banker, get an attorney, do your due diligence. You’ve spent all this time building this amazing business; spend just as much time and be that as discerning about who you would let invest in your business. Make sure that they’re the appropriate type of organization.
Upstack has engaged in conversations about acquisitions with approximately 100 agents.
Upstack’s Nick Caruso
So says Nicholas Caruso, Upstack’s head of global channels and alliances, who said Upstack has taken a careful approach to picking the advisers that will join its team. Specifically, he said Upstack is targeting partners that want to remain in the business.
“We’re not simply buying a business and saying, ‘Hey, go somewhere else,'” Caruso told Channel Futures. “We’re looking for partners for a much longer investment.”
Caruso joined Upstack earlier this year, moving on from the same job title at Zayo Group. Prior to Zayo, he worked in Frontier’s channel.
Upstack’s Danielle DeCosta
Caruso also told Channel Futures that Upstack has hired Danielle DeCosta as its vice president of supplier development. DeCosta was director of partner enablement for network and communications at Pax8. She also managed supplier development for Intelisys. Caruso spoke about some of the unique strategies DeCosta is bringing to the table, particularly as it pertains to MDF.
Scroll through the 12 images above to see highlights of our conversation with Caruso and how Upstack’s model is changing the channel.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn. |
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