News
DealWire Philadelphia, Q1 2010 Volume VI, Issue I
NewSpring Ventures Recent Investment in Message Systems, Inc.
Interview With:
Mike DiPiano, General Partner of NewSpring Ventures on the firm’s recent investment in Message Systems, Inc., a worldwide provider of message management solutions and services for email service providers, Internet service providers, social networks and large enterprises that need to manage large volumes of business-critical email. Learn about the origins of the deal, the Company's technology and how it differs from their competitors as well as the local advisors that worked on the deal.
ACG: Can you tell us a bit about the origins of your recent investment in Message Systems, Inc.?
One of the key differentiations of our firm is the ability to leverage our network and deal flow across multiple fund strategies. While the investment was made through our growth equity fund, NewSpring Ventures we were introduced to Message Systems through our mezzanine investment team. Message Systems was a family held business that had never raised a round of external capital. The management team did an incredible job bootstrapping the company over the last several years and growing the business to its current level of success through free cash flow. Many companies that experience rapid acceleration in growth with limited capital resources, such as Message Systems, inevitably face the difficult decision of raising institutional capital to maintain growth trajectory and product innovation versus limiting initiatives sometimes at the expense of long term shareholder value. The management team was committed to capitalizing on the current opportunity in the digital messaging space and viewed external capital and the network and experience that a financing partner could bring as the bridge to achieving their goals.
ACG: Were there any local advisors associated with the transaction?
Yes, Partner Richard Jaffe, Associate Pam Meredith and the team from Ballard Spahr served as legal representation for NewSpring in the transaction. Additionally, we utilized accounting due diligence services from Solomon Edwards Group.
ACG: Tell us a little more about Message Systems’ technology, and how it differentiates itself from its competitors?
The Company’s message management platform is built around a next generation message management platform called “Momentum”. Momentum serves as the central integration and processing hub for all forms of digital messaging (email, text, IM) within an organization’s infrastructure connecting with internal and external data sources, applications and systems. Momentum’s integrated capability enables it to function as a controlling gateway, intelligence router and advanced message transfer agent for handling messages exactly in accordance with specific business rules. In line with changing consumer and business communication behavior, the industry is shifting from open source and earlier generation commercial solutions to those with more robust capabilities. Many of the incumbent technologies that are in use today have been in existence for over twenty years and lack the scalability, sophistication and flexibility of handling complex digital messaging systems that are now required by businesses to effectively compete in the marketplace.
ACG: There is obviously a component of Message Systems’ service offering that focuses on social networking. Do you believe this media will become more important as a business tool in the future?
Absolutely. We are seeing more and more of our businesses, including our portfolio companies, utilize Web 2.0 social media technology. The traditional sales and marketing model is clearly changing and social media technologies will continue to play a big part in how companies embrace this market shift. The ways companies will ultimately utilize this media really depends on their business, but we’ve seen examples where companies can generate a meaningful ROI through lead generation, marketing initiatives and monitoring online conversations about their companies.
ACG: New Spring manages three separate funds. Can you tell us about each of them?
NewSpring Capital is a family of funds investing across three investment strategies. NewSpring Ventures provides equity capital to growth and expansion stage companies with a focus on business services, enabling technologies, and information technology. NewSpring Health Capital provides equity capital to healthcare companies within the life sciences, healthcare services, and medical device sectors. NewSpring Mezzanine Capital provides mezzanine capital for expansion stage and buyout opportunities in the business services, health care, information technology, and specialty manufacturing sectors. All three NewSpring Capital funds work closely together sharing a unified culture that fosters a consistent, disciplined approach to investing. Each fund maintains its own dedicated senior management team, investment committee and limited partner advisory board. We have a strong history of partnering with outstanding CEOs across the region to build exciting success stories, while bringing value-added benefits as investors.
ACG: Are there any other industry sectors that NewSpring is particularly bullish about?
NewSpring Ventures focuses on a wide range of high growth sectors that our team knows well, where the businesses can demonstrate a high degree of capital efficiency. Markets and sectors can change quickly. We find it very important to back strong management teams that are leaders in their fields, know their industries well, and can adapt in the face of changing markets.
