This AMS has an inside track on blockchain tech

Thanks to last year’s acquisition of Wild Apricot, Personify is poised to lead the pack on blockchain technology in the AMS market. Why?

Dmitry Buterin, the founder of Wild Apricot happens to be the father of Vitalik Buterin, co-creator of Ethereum, which is widely acknowledged as the second most valuable cryptocurrency behind Bitcoin. Dmitry is a blockchain enthusiast, and left his position at Wild Apricot to pursue business ventures in blockchain.

And although the elder Buterin has moved on from his post at Wild Apricot, he still serves in an advisory role at Personify, and the Wild Apricot technical team remains highly interested in how blockchain could be applied to associations.

So if you’re curious to see how blockchain applications make their way into the association market, keep your eye on Wild Apricot and Personify.

MemberSuite accepts $5.5M in funding

In November 2017, MemberSuite accepted a $5.5M round of funding. Check out the SEC filing.

To the best of my knowledge, MemberSuite is the only venture capital-backed AMS in the market, and has raised $13M in funding since September 2016. They appointed a new CEO in November 2017. This round of funding may have been used to acquire the shares owned by the founder and former CEO, transferring ownership of the company to new shareholders.

M&A and Investment Panel finalized for AMS Fest

Before there was Community Brands, there was the dynamic duo of AMS Fest & theNIRD, leading the conversation about M&A, investments, and consolidation in the association technology market. For more than 14 months now, we’ve been informing association executives on how high finance affects the association technology landscape before anyone thought it mattered, and we’re just getting started.

Our next collaboration is coming up November 13-14 at AMS Fest in Washington, DC. We’ve convened an all-star panel of CEOs to discuss how different financial models affect their customers, and ultimately, their customers’ members. Expect a spirited debate as privately-held and private equity backed AMS CEOs go toe-to-toe on provocative questions about their financial posture. The panel includes:

  • JP Guilbault, President of St. Petersburg-based Community Brands. The blockbuster Community Brands deal, which consolidated four leading AMS platforms in March 2017, lent new energy to the M&A and investment conversation that AMS Fest and theNIRD started. Community Brands is backed by private equity firm Insight Venture Partners. And JP is excited about it, too (see his recent Facebook post).
  • Charlie Vinal, CEO of Euclid, a privately-held company based in Bethesda, Maryland and purveyors of the ClearVantage AMS. Euclid boasts that “90% of the company is owned by Euclid employees. This means that Euclid answers to its clients, not venture capital or private equity firms, many of which put short-term profitability ahead of long-term client satisfaction.” How’s that for an opening salvo?
  • Sarah Asterbadi, CEO of MemberNova, a relatively new entrant to the AMS market, based in Toronto. MemberNova is privately-held, with backing from a successful parent company, Club Runner, that specializes in club management software. I was recently introduced to Sarah by phone, and — hang on — after our conversation, I’m convinced she’s a firecracker who’s going to light a spark that’ll blow the lid off of this conversation.

But wait, there’s more!

We’ve also got an association CEO on our panel to bring the perspective of how “the big cheese” should be thinking about M&A and investments.

  • Mark Dorsey, CAE is CEO of the Construction Specifications Institute, based in Alexandria, Virginia. Mark brings a well-rounded perspective to the panel as a CEO who has experienced the effects of M&A and investments on associations he has headed, and negotiated the sale of a business owned by his association employer. He’s also highly respected in the association management field, and an ASAE Fellow.

Hold on! Still more electrifying goodness to share: During the session, we’ll reveal the results of a survey on association executives’ attitudes towards the various funding models at work in the association market. You can take the three-minute survey now, if you haven’t already.

Register for AMS Fest now — there are only a few seats left — to catch this panel discussion and other cutting-edge sessions on blockchain, EU data privacy laws, digital transformation, and Uberization. Plus a few you’ll-never-guess surprises.

Register now. Seriously; you’ll regret not attending.

Association Technology M&A and Investment Visualization

I’m preparing for a couple of presentations on consolidation in the association technology sector (including at AMS Fest, November 13-14 in Washington, DC), and wanted to share this visualization in my slide deck of how technology companies are aligning, and which ones have taken investments. This isn’t a complete view of the activity, and covers about a two year period, but it should help you grasp the extent of the consolidation. If you’re reading this in your email inbox, download the images, or click through to see the visualization.

ANALYSIS: What’s driving this spike in down-market M&A activity?

Wild Apricot, Weblink, GrowthZone, BuilderFusion, and MemberClicks have all been part of an acquisition within the past 60 days. The number of organizations affected by these deals is around 40,000. If we assume that the average small organization affected by these deals has 500 members, we can project that about 20M memberships are wrapped up in this wave of acquisitions.

What’s driving this rash of acquisitions in the down-market AMS space? Three things:

  1. The Domino Effect. Since the blockbuster Community Brands consolidation in March 2017, more and more investors have been looking at the association space. Last week I attended a 300 attendee conference for a small niche of the association market and met a private equity fund manager who was there scouting out companies potential investment or acquisition. This isn’t a rare occurrence. Rarely does an association industry conference go by that there isn’t an investor or two scoping out the trade show floor for a potential deal.
  2. FOMO. Fear of Missing Out. With the quickening pace of M&A in our technology market, many companies don’t want to be on the outside looking in. Some technology company founders and owners see the alliances being drawn, and they fear if they don’t get into one of their own, they’ll miss out on opportunities.
  3. Enterprise AMS platforms are spoken for. All of the enterprise grade AMS companies are either spoken for, or are fiercely independent (though we’ve seen some fiercely independent company founders get acquired or bought out this year). There also just aren’t as many enterprise AMS platforms as there are smaller AMS players.

Implications of all this activity?

  • Inevitably, some percentage of customers won’t like the acquisition, and will switch to another vendor. One industry expert estimated that in one of the larger acquisitions in the past five years, between 20-40% of the clients of the acquired company migrated to another AMS.
  • New AMS platforms are cropping up to fill the void left by the acquired companies.

MemberClicks has acquired Weblink

Two AMS platforms prevalent in the small staff association space are coming together. MemberClicks announced on November 2, 2017 that they have acquired Weblink. Read the press release. Back in May, MemberClicks acquired event registration software company, ePly, and in February 2017, they accepted a growth equity investment (amount undisclosed).

GrowthZone acquires BuilderFusion

GrowthZone, a leading provider of technology solutions for associations and chambers of commerce with nearly 3,000 customers has acquired BuilderFusion, an AMS tailor-made for home builders associations. Check out the press release.

ANALYSIS: Personify/Wild Apricot deal is brilliant

On September 26, 2017, Personify, widely known for their enterprise level AMS platform and high-profile customers, acquired Wild Apricot, an entry level membership management system. This acquisition is in addition to the November 2015, acquisition of Small World Labs, a leading online community vendor. Personify is backed by Rubicon Technology Partners, a private equity firm with offices in Menlo Park, CA and Stamford, CT.

Because they serve mostly micro-associations (very small staff or  volunteer run) Wild Apricot is relatively unknown among career association executives. Let’s fix that.

Toronto-based Wild Apricot is a pure SaaS (Software as a Service) technology company with over 22,000 customers. Personify is now boasting a customer base exceeding 30,000 customers. 21.5% of Wild Apricot’s business is based outside the US, giving Personify a foothold overseas.

This number has raised some eyebrows. An industry insider sent in this tip: “I would seriously question the number of customers that Wild Apricot and Personify are throwing around.” So I did some digging.

According to Michael Wilson, Chief Strategy Officer at Personify, the number is indeed correct and more than 50% are ongoing paying customers. Wild Apricot’s freemium model allows users to register for a free 30 day trial, begin managing their membership, and then start paying if they like the service. There’s also a completely free version for organizations with less than 50 members which is where the balance of the customer count comes from.  According to Wilson, “The model of allowing a free level expands the user base of clients that can advise us on how to continually improve the product in the best way.”  The CSO continued, “This is also good for the industry as it provides free software to small organizations that cannot yet afford to pay. Also, as they grow, we do too.”

Pricing ranges from $40/mo to $270/mo, so if we assume that the average paying customer is paying the $70/mo rate (the second to lowest rate) that would give Wild Apricot about $10M in annual revenue.

Their customer acquisition model is almost entirely word of mouth and inbound marketing — SEM, content marketing, social media marketing, and leveraging review sites. According to Personify, Wild Apricot has been the highest rated membership management system on technology review site Capterra for the past five years. Through these efforts, I’m told by Personify that Wild Apricot has grown 20% per year with a sales team of zero. Think about that. No sales team and about $10M in revenue.

Having no sales staff has a couple of important implications:

  • Wild Apricot can devote a greater share of its resources to R&D. Wild Apricot boasts an R&D staff of 100.
  • There’s no need to send sales staff to attend or exhibit at conferences and events — hence the lack of awareness of Wild Apricot among career association executives and association sector technology experts.

Because of the shroud of mystery over Wild Apricot, many industry insiders I spoke to initially scratched their heads on this acquisition. Two products, seemingly incompatible, and addressing widely different markets coming together? How does this make sense? One consultant remarked: “This acquisition only makes sense for Rubicon. It’s designed to boost top and bottom line and make EBITDA look better for the next buyer.”

But this deal is actually brilliant. Here’s why: Unlike other recent acquisitions which brought together similar products addressing similar verticals, Wild Apricot and Personify have almost — *almost*; hold on to that word — no overlap.

Some recent acquisitions in the association technology market are forcing the parent companies to reckon with issues such as:

  1. How to continue managing multiple, very similar platforms that serve the same customers.
  2. How to merge the similar platforms from a technology perspective
  3. How to merge the similar companies from a personnel perspective (e.g., layoffs or new roles)
  4. How to manage sales teams for two competing platforms under the same parent company who are competing for the same business
  5. How to choose which product to deprecate
  6. How to communicate about all of the above challenges to customers, prospects, and the broader market

Personify and Wild Apricot have no such dilemmas.

Remember that *almost*? Here’s the almost: During due diligence, the Personify team discovered that 25% of their customers have local chapters who are Wild Apricot customers. This creates an interesting opportunity: think about a huge international organization that needs a 500HP AMS to give them throttle for their complex scenarios, but their chapters just need a bike to get them around. What if those technologies played nicely together? Register for the international conference through your chapter’s website, renew your certification through your chapter’s website, international can crunch engagement data to serve chapters high-potential new volunteers, etc.

“This is an area we are really excited about,” said Wilson.  “This acquisition actually helps large organizations solve the dilemma of how to bridge the data and user gap between the large national headquarters and the local, often independent affiliates.”

This deal now brings Personify’s total client base to a reported more than 30,000 organizations when including the national organizations and local entities using Personify360, Small World Community, and Wild Apricot.

Perhaps the only downside to this acquisition is the perception in the broader market rumor mill that Personify has been distracted from its core business by pursuing a deal that — despite its brilliance — seems to be a mis-match.

For those that have worked in the association market for more than a few years, you may remember that after private equity investment dollars first came into Personify in 2013, there was a period of staff churn at the company. While that initial churn generated a few critics, it seems Personify has turned the corner and their arrow is pointing up.

I was given a confidential client retention number that I can’t share, but as a former membership director, I would have been very satisfied with the number. Personify was also recently named as one of the Top 20 Most Promising Cloud Solution Providers by CIOReview Magazine in 2017. Perhaps Personify is doing better than the critics think.

My bottom line: Some of the most knowledgeable and respected industry insiders were initially conflicted about this acquisition, but have come around. Pure SaaS play companies are among the most valued in the broader technology market. In my opinion, Personify has bagged a unicorn, and I believe it has taken their competitors by surprise. I personally think that this is a good deal for everyone involved, and good for the association technology market.

Catch theNIRD at AMS Fest, Nov 13-14 in DC

AMS Fest, the no-holds-barred association technology event that was recently acquired by Association Trends, will be held at the National Association of Home Builders in just a few weeks. Once again, I’ll be moderating a panel discussion on the impact of M&A and investments on associations’ members and missions. With a recent flurry of new merger and acquisition activity, there will be plenty to discuss.

AMS Fest has evolved into the must-attend event for anyone wanting to stay ahead of the association technology curve. It’s the event where anything can happen, and there are big surprises in store for attendees.

Some of this year’s featured speakers include in-demand keynote speakers such as Shelley Alcorn, Ian Khan, and Tom Morrison. Attendees will also be able to watch up to eight lightning-fast demos from some of the industry’s leading AMS platforms.

AMS Fest has grown every year, and there’s a chance it could sell out. Register now, or you might regret it!