Vernick, Jones Join Upstack Leadership Team, Reject 'Roll-Up' Stereotype
"The writing is on the wall. The superagent is the evolution of this channel," J.R. Vernick told Channel Futures.
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For many circles in the channel, the term “agent roll-up” has latched onto Upstack. One rival private equity-backed superagency has described companies like Upstack as using a “financial arbitrage” strategy.
“It’s very easy to see a roll-up from the outside, just taking 27 companies and putting them together,” J.R. Vernick, executive vice president and co-head of customer experience (pictured), told Channel Futures.
But Vernick said his and Jones’ appointments shows that Upstack is interested in more than just their evergreen commissions. He pointed to Chris Palermo, who took the role of Upstack president in late 2021 after selling the business of GCN.
And other Upstack-acquired agencies have leaned into roles at the parent organization. Vernick said he and many of his peers want to be there for the long term.
“A roll-up is going to have earnouts, and then traditionally you ride out the earnout and you’re gone,” he said. “Clearly that’s not what’s happening here when you have guys like us who are saying, ‘No, we want to be part of this. We want to run this organization, not cash out and run away.’ And that’s the narrative that’s out there about a roll-up.”
Darren Jones said many peers have asked him and Vernick why they chose to accept the new roles. But he said he thinks the more interesting question is why Upstack offered the roles.
“Usually, [acquiring companies] have owners require one year and then they say, ‘All right, thank you, guys. Let’s get you off the books.’ And Upstack is saying, ‘Hey, how do we get you guys to do these things longer?'” said Jones, executive vice president and co-head of customer experience.
Upstack through these 27 partnerships has books of recurring monthly commissions. This evergreen revenue is notoriously lucrative, especially considering that some contracts last upward of a decade. The other side of that is, many of those customers bought from a trusted technology advisor that they knew, rather than a large company.
What’s the value to customers of keeping those familiar faces on board?
“Continuity in a commodity-based businesses is extremely important,” Jones (pictured) said. “Because that’s the way people like to do business on both sides.”
Vernick noted, however, that prior to Upstack, RDS went through an evolution in terms of which people were engaging with the customer.
“We were the face of a lot of our client accounts for for many years, and as we grew and scaled this business, we brought in a lot more resources, and we had 30 people. So slowly, on each of these accounts, they start interacting with somebody else in the organization, and as long as they’re getting as good or better service, they’re happy,” Vernick told Channel Futures.
“Yes, continuity is extremely important, and we want to keep people around, but as long as we’re providing the customer with as good or better support than they’ve had, there can be a little bit of change in terms of who’s supporting them. It’s inevitable as we scale; that has to happen.”
Jones added that joining a larger organization allows for standardized best practices that can make a team faster at responding to customer needs.
“And we still get to compete with direct carriers, where the stereotype sometimes fits that it’s changing faces and a little more process-oriented and [fewer] small-company touch points. So we still feel like we’re in the right balance of the marketplace when it comes to that,” Jones said.
Independent agents have long struggled with the balance of “hunting” – searching for and securing new customer logos – and “farming” – retaining and expanding existing accounts.
Jones said RDS historically landed in the category of a farming business.
“Our cliche thing we always used to say, when we were competing or not, was, ‘The sale started after signature.’ It’s what you do after the deal was done. You’re growing revenue from there,” he said.
Vernick said Upstack intends to farm the many customer bases it has acquired. He said that although RDS already focused on farming, it didn’t always have the time to analyze areas where it could cross-sell new technologies.
“There wasn’t as much focus on that as there should have been, and that is an absolute strategy of Upstack,” he said. “And additional resources and scalability gives us the ability to do that.”
Farming is often thought of in terms of technology cross-selling. But what about layering in different professional services? Bridgepointe Technologies’ recent formation of a life cycle management division, featuring RFP management, strategic sourcing and other billed services, comes to mind.
Vernick said many of the 27 Upstack agencies bring their own unique flavor of professional serivces. One example is recently purchased LinkSource Technologies, which offered mobility and telecom expense management. Vernick said Upstack is looking to expand successful professional services of respective agencies to the rest of the Upstack partner base.
“We have different versions. Different agents are a little bit different versions of them. So we figure out what’s best practice, who’s doing it best, put together the best models and then go roll it out to the customer base,” he told Channel Futures.
Upstack earlier in March announced deals with LinkSource Technologies and The Monaco Group. Both firms, like RDS, are highly accomplished Intelisys agents whose leaders have earned industrywide recognition.
Vernick said he and Jones were familiar with the leaders at LinkSource and Monaco Group. Though he said they hadn’t been talking to each other during the acqusition process, RDS’ presence at Upstack played a factor. The same goes for GCN, and Subsidium, which both had significant footprints in the Intelisys ecosystem.
“A big part of the decision-making process was, ‘Who’s already here? Who’s was part of Upstack? What is the caliber of companies that have that have gone to Upstack, because I want to be part of a winning team,'” Vernick said.
Jones said LinkSource and The Monaco Group likely took the time to observe how Upstack-acquired businesses had been faring.
“It is a small world, and good news and bad news are contagious in this industry. So the fact that they even entertained it a couple years into this is a good sign,” Jones said.
Vernick said independent agencies like The Monaco Group and LinkSource are following an industrywide trend of partnering with an institutional investor.
“Go and look around now after you add LinkSource and the Monaco Group to Upstack. There aren’t really that many really successful agencies out there. Because the writing is on the wall. This is this is the evolution of this channel. The superagent is the evolution of this channel,” he said.
The agent channel, in the eyes of some faces an existential crisis. Some partners say they are trying to add pre- and post-sales services that they can put on their own paper, as an additive to the commissions they get from vendors. Other partners say the key is to adopt next-generation and higher-margin technologies like cybersecurity and contact center.
But in both cases, those pivots require new personnel, and new personnel cost money.
“So if you’re Joe Monaco, you could say, ‘What’s the best future for my company? Is the best future for my company to go at it alone and go compete with Upstack and some of these others? Or do I join them?'” Vernick said.
Jones said RDS employed 30 people at the time of its merger. But even for such a relatively large agency, the Upstack partnership provided “instant scalability,” he said.
He added that the deal served to promote the potential career growth employees.
“We were able to supplement all our limitations as a smaller company, which is scale through the carriers, scale through retirement resources, scalability through health benefits, a lot of things that aren’t necessarily important to business owners but important to people you care about and worked hard for you for all those years,” Jones said.
Vernick and Jones said their appointment to the leadership team, as well as the appointment of other leaders of acquired agencies, contradicts the notion that Upstack is not an operator-run business.
“We are the operators,” Vernick said. “The 27 acquired companies are the operators.”
Vernick also pointed to employees who joined the company organically.
“[CEO Chris] Trapp was obviously in this business. He was in the data center business so he understands it … People on the commissions team ran commissions for the largest TSD, and there are people in implementation and support that came from carriers. It’s more than just a PE-backed roll-up,” he said.
Upstack’s total number of employees, including people who came over from acquired agents, numbers approximately 200, according to senior vice president of marketing Alexander Cole. Cole said Upstack’s recent gathering of advisors and employees in Austin, Texas, helped accelerate the integration of its portfolio companies.
Vernick said the leadership team does not want to view the company as “27 agencies and customers with 27 agencies.”
“Right now we are bringing those sides together … That is our job – to fully integrate everybody into one cohesive Upstack team that supports Upstack customers,” Vernick said.
“We’re going to make sure that they have as good or better experience than than they had previously. For us, the most important thing is that we take care of the client. If we take care of the client, everything else takes care of itself.”
Upstack’s total number of employees, including people who came over from acquired agents, numbers approximately 200, according to senior vice president of marketing Alexander Cole. Cole said Upstack’s recent gathering of advisors and employees in Austin, Texas, helped accelerate the integration of its portfolio companies.
Vernick said the leadership team does not want to view the company as “27 agencies and customers with 27 agencies.”
“Right now we are bringing those sides together … That is our job – to fully integrate everybody into one cohesive Upstack team that supports Upstack customers,” Vernick said.
“We’re going to make sure that they have as good or better experience than than they had previously. For us, the most important thing is that we take care of the client. If we take care of the client, everything else takes care of itself.”
Upstack, the private equity-backed superagency, has tapped the leaders of one of the firms it acquired to head up customer experience.
J.R. Vernick and Darren Jones, who agreed to bring their company, RDS Solutions, into Upstack more than a year ago, will be executive vice presidents and co-heads of customer experience (CX) at the New York-based channel partner. In the eyes of Upstack leadership, the appointment demonstrates that Upstack is driving integration across the 27 agencies whose businesses it has purchased over the last two-and-a-half years.
Upstack’s Darren Jones
Aligning More Closely
RDS Solutions, an Intelisys palladium partner and one of the larger firms in the technology advisor channel, first announced its deal with Upstack in February 2022. Jones and Vernick initially accepted roles as partners and executive managing directors; however, they said Upstack leadership wanted to involve them more in the overall company strategy.
Upstack’s J.R. Vernick
“Following our acquisition of RDS, we have spent the last 12 months working closely with J.R. and Darren to redefine what customer experience means for our industry,” Upstack founder and CEO president Chris Trapp said. “I couldn’t be more enthusiastic about them taking the helm to architect and deliver this discipline at scale and quality hasn’t been done before.”
Trapp and Upstack managing director Jake Cummins both said RDS set an industry standard for customer experience.
“As an advisory partner, one of the most compelling opportunities Upstack offers is the ability to collaborate with and draw from the collective expertise of other top partners in our industry,” Cummins said. “I can think of no better example than J.R. and Darren who are leveraging nearly two decades of experience to lead CX at Upstack — a move that is a tremendous value-add for our customers and advisory partners.”
Upstack’s Christopher Trapp
Upstack Update
Upstack emerged in early 2021 with $50 million in funding from Berkshire Partners. It also drew financing from two other investors. It has now acquired 27 technology advisor agencies. Furthermore, Upstack has also announced several high-profile back office hires and supplier agreements.
Upstack’s Jake Cummins
Vernick and Jones in an interview with Channel Futures detailed their vision for Upstack customer experience. They also explained they view the company as more than a “roll-up.”
View highlights from the conversation in the nine slides above.
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