Private-equity firm Great Hill Partners of Boston has taken a majority stake in Waterloo-based Auvik Networks with a US$250-million investment that positions Auvik for continued growth and allows existing investors and internal shareholders to convert some of their equity into cash.
Auvik’s leadership team will remain in place and its Waterloo operation will continue to play a central role in the company’s growth strategy, said co-founder and CEO Marc Morin.
“The business is staying intact, everyone’s staying, the whole team’s operating the same way,” he said. “I like to say it's more like swapping horses – we're swapping some of our investors with this (new) investor, as well as getting growth equity injected into the business.”
Launched in 2011, Auvik has grown from three co-founders to a workforce of 217. Most of its employees are based in Waterloo, but the company has a presence in the U.S., the U.K. and Spain, and plans to grow in all locations.
Marc Morin, CEO, Auvik Networks
Auvik designs cloud-based software that helps IT managed-service providers monitor and manage their clients’ IT networks. A number of developments in network management, such as the shift to cloud-based systems, have converged with the remote-work phenomenon to bring enormous change to how organizations manage their digital networks.
Morin said the investment by Great Hill Partners gives Auvik the resources to provide solutions to these challenges and win a larger share of a fast-growing global market.
“We have a very credible and awesome path in front of us and part of this is figuring out the right financial organization to support that growth,” he said. “We think there’s a huge opportunity for Auvik to be a significant player in the IT ops (operations) space and it’s now time for us to lean into that.”
Great Hill Partners are confident they’re backing a strong horse.
“Auvik has a truly innovative approach to IT ops and has developed powerful software that IT teams not only enjoy using, but is essential to their operations,” said Drew Loucks, a Managing Director at Great Hill Partners. “We have been very impressed with the company’s customer satisfaction rating and reputation and we believe the team is well positioned to capture a significant portion of the evolving market moving forward.”
While the investment deal gives the private-equity firm a majority stake in Auvik, adjusting the roster of investors is just a normal part of the growth journey, Morin said. Long-time investors need an opportunity to exit at some point, and new investors with “a bigger bag of money” and a focus on growth are needed to keep the company moving forward.
“We spent a lot of time looking for the right partner,” he said. “We're still in the growth phase so we were looking for a financial partner that was really focused on growth versus business optimizations. And we feel we found the right partner in Great Hill because they are growth-oriented.”
Having a majority stakeholder isn’t entirely new for Auvik, said Morin. When the company had three venture capital investors, their combined stake amounted to approximately 50 per cent.
The investment by Great Hill Partners has allowed some of Auvik’s earliest investors to sell their stake and exit the company. Morin declined to say who has exited, but one early investor – Celtic House Venture Partners – is keeping its stake in the company.
The deal also provides a secondary offering that allows founders, employees and other shareholders to cash in on some of their equity ownership.
A veteran tech entrepreneur who previously co-founded Waterloo tech stars PixStream and Sandvine, Morin said it is important to give founders and employees an opportunity to sell some of their equity along the way as an incentive to keep them focused on growing the company.
“It’s absolutely crucial in the journey of any business,” he said. “It's really important for founders to take cracks and pieces off over time in order for them to be bold and remain bold going forward versus always looking to fully get out at some point.
“And that applies to existing investors as well. People have been in for a long time, it’s appropriate for them to say, ‘Well, we got you to this point, my job is done now. Put the secondary boosters on.’ A different set of investors with different profiles are needed throughout the journey of a successful company.”
Asked about media speculation that Auvik was planning an initial public offering, Morin said that he and his executive team are always looking for the right financing approach to support the company’s current growth needs.
“We're always trying to figure out what’s the right structure for the business, whether it’s VCs, private equity, private versus public,” he said. “But the short story is, the intersection of where we are as a business, our growth projections, the things we need to do, I would say probably intersect best with a private investor at this phase than a public investor.”
The US$250-million investment in Auvik is the latest in a string of mammoth funding deals for tech companies in Waterloo Region. In one recent 30-day stretch, tech companies in the region raised a combined $1.1 billion in public and private investment – the ecosystem’s richest four-week run ever.
Among those deals, edtech unicorn ApplyBoard finalized a Series D raise of CDN$375 million – the biggest private investment round ever for a Waterloo Region tech company, according to a search of Crunchbase records.
Other recent raises include a US$150-million Series F round by cybersecurity firm Arctic Wolf Networks, a US$260-million Series E round by e-marketplace Faire, a US$28-million Series C financing by retail platform Tulip, and a US$17.2-million Series B raise by satellite-data specialist SkyWatch.