Fledgling distributor Progress Distribution is set to launch an emerging technology incubator in London, once it has completed its deal for investment from a high-net worth individual.
Launched last August, Progress is a specialist security VAD carrying TrapX, Ironscales and Cybereason in the UK.
Progress founder John Quinn told CRN that the distributor is close to agreeing funding of between £2m and £2.5m with a private investor worth around £130m.
Though unable to reveal the identity of the investor, Quinn said a portion of the money, once received, will be used to secure a 10,000 sq ft building in London to house emerging tech vendors as they enter the UK, with the rest of the investment being used to fund two acquisitions.
"Standard distribution is broken and everybody knows this, but no one really talks about it," he said. "If you speak to the vendors they all want something different because gone are the days when you want distributors for banking and finance, logistics, tax - all the sort of things that come from standard distribution services.
"There are something like 600 security start-ups in Israel alone this year wanting to come to the UK so there is a very large market for incubation services. The problem with standard distribution, or the broadliners, is they don't really have the ability to create demand. Tech incubation is the future of VAD."
Once launched, the incubator, tentatively named The Tech Cube, will provide vendors new to the UK with services including office space, sales and presale teams, lead generation, sales and marketing engines, and introductions to UK channel partners - with Progress having strong relationships with Blue Cube, CDW and Proact.
With around £1m of the potential investment set aside for setting up the incubator, the remaining £1.5m has been slated for acquisitions. Quinn revealed he has his sights on acquiring a professional services outfit, with one potential deal being worked on at the moment, and a managed security service provider that he is yet to identify. Both of these will be set up so VARs can white-label the services they offer.
The third part of the Progress business, alongside distribution and the incubator, is Progress Capital, which provides a financing mechanism that allows vendors to be paid upfront in full for their subscription solutions.
The depth of Progress Capital's pockets, Quinn explained, means it can afford to front the cost of a vendor's annual subscription - up to five years in some cases - meaning the VAR and vendor both get their margin on a five-year deal and the customer can pay back Progress Capital's financial backer on a monthly basis.
"We did this deal with a major bank - I won't name who it is because our competitors might go to that bank and get the same deal - but we have an unlimited amount of money," Quinn explained. "It's a key differentiator for us. [Other VADs] don't have what we have.
"If you want to exercise the renewal on an upsell, we can turn that one-year renewal into a five-year renewal. That's times-five revenue for the VAR with their margin, and the vendor, all in one hit.
"Vendors are over the moon because they can times their revenue by five, the VAR is happy because it gets paid within five days and has no credit risk with the customer, and we get paid within three days - everybody wins.
"If a VAR wants to show massive value to the vendor, they can come to Progress Capital and get a 12- to 60-month payment deal, paid per month, and when you factor in the tax relief you'd pay [for example] £96,000 on a £100,000 deal because it's opex not capex."
Next-generation cybersecurity is rumoured to have hired Goldman Sachs as it gears up for going public, according to Reuters report
Cisilion's Hannah Cunningham gives a shortlisted finalist's view of last week's Women in Channel Awards
Chinese cloud vendor ramps up its European presence with two London datacentres
A director at an industrial supplies company based in Cornwall reveals his dos and don'ts when it comes to how IT suppliers deal with his firm