The CEO of Arcus Global, an £11m-revenue AWS partner that has developed its own SaaS platform for local authorities, has talked CRN through why he felt it was the right time to take on private equity investment.
Arcus yesterday announced it has scored a £3m equity injection from YFM Equity Partners in exchange for an undisclosed stake in the business.
Founded in 2009, the Cambridge-based firm has surfed rising demand for public cloud to grow revenues from £4.1m in 2015 to a projected £13m in its current year.
It now has over 100 staff and counts 30 local councils among its client base.
Talking to CRN, CEO Denis Kaminskiy said he and his team had built the business to a point where extra help was needed to scale.
"We think we've done really well with the growth up to this point," he said.
"At some point this needs external investment to support, and it can be quite large. We wanted to do it at the right time, rather than take a lot of money and not know what to do with it. We wanted a partner who could start with us and grow with us as things improve, and we ran a fairly lengthy selection criteria."
Kaminskiy said the cash injection would be used to introduce new features to its product and grow every aspect of its business, especially sales and marketing.
In its last full accounts filed on Companies House, for the year to 30 June 2016, AWS Public Sector Advanced Consulting Partner Arcus posted a net loss of £3.04m on revenues of £6.12m.
It did not file full accounts for its fiscal 2017 because HMRC raised the threshold for exemptions for small businesses but Kaminskiy said paper losses are not currently a concern due to Arcus' R&D-heavy model. Revenue for that period hit around £9m, he indicated.
"We are very R&D heavy and we are building intellectual property all the time," he said.
"We also don't capitalise our R&D, so you see the full value of R&D in the accounts. So provided the business is funded we aren't necessarily sensitive to paper losses as a lot of that is - as you say - supporting future revenue.
"The more we invest in R&D, the higher the rate of growth for the business in the future. That's one of the reasons we wanted to work with a PE house - they understand that model and they are used to supporting software businesses."
Although Arcus has developed its own intellectual property around Amazon Alexa, Kaminskiy picked out two deals to supply local councils with its SaaS platform as its most groundbreaking work.
"We have done a wholesale transformation with a couple of councils where eventually the whole council went onto one technology platform, giving them pretty amazing savings. It's genuinely one platform, one database, single record, which I think is completely unprecedented in the public sector," he said.
"There have been technologically lots of very exciting things, but being excited about technology is not what the public sector needs. The public sector needs to make service improvements and savings."
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