We are excited to announce the second investment from our new fund.
A few weeks ago, we acquired OnePlus from its founder after almost a year of working directly with him and his team to prepare the company for the transaction. It is not uncommon for us to spend this much time considering an acquisition like this, and we often have several of these conversations going on at the same time. Some eventually close and become portfolio companies of ours, but most of them don’t. It’s just a typical part of our deal sourcing process – mix directly sourced deals with ones from bankers and brokers.
A quick refresher on what we do at ParkerGale. We only do buyouts, so by providing liquidity to a seller we always take a controlling ownership position in a business. We are always the first institutional capital so we either a buy a bootstrapped company when a founder is selling, or we carve-out a business out from a larger company. We invest in technology businesses with either subscription revenue or transaction-based business models. We look to build upon what has already been done by bringing new people into a company along with a host of operating, financial, product development and sales initiatives.
OnePlus is an exciting, small company in the Internet of Things (IoT) market. We know what you are thinking, the Internet of Things, how ‘Silicon Valley’ of those Midwesterners from ParkerGale, right? Well, in OnePlus’ case, by IoT, we actually mean the “Internet of Trash!” If you think smart thermostats are all the rage, wait until you hear about smart garbage. OnePlus uses sensors and software to help large companies reduce their waste hauling costs. Their patented sensor technology monitors the fullness of large, industrial waste compactors for some of the world’s largest property owners, retailers, and government agencies. When our sensors recognize that a compactor is full, our software automatically alerts the waste hauler (think Republic, Waste Management and many others) and the property owner that it’s time for a pickup. Pretty simple, right? But unlike most emerging IoT companies attracting venture funding and media attention lately, OnePlus delivers an immediate and massive return on investment to its customers. Our technology is saving companies millions of dollars a year and it’s making waste haulers much more efficient, saving them tons of fuel, reducing their labor costs and increasing employee safety.
But you thought ParkerGale only buys profitable technology companies. Well, that’s what impressed us about OnePlus – years of profitable, bootstrapped growth, deep domain experience with thousands of installations delivering a clear ROI to name brand customers, including many of the largest retailers and property owners around the country.
Other than these characteristics which perfectly fit our investment profile, we liked OnePlus even more because it gave us a chance to back a CEO we have known for years. We met Klaus Voss in 2007. He has deep experience in environmental technology and real estate – a rare combination and a great fit for OnePlus. Over the years, most deals we looked at with an environmental angle were sent over to Klaus for a quick read and OnePlus was the one that really clicked for him. So, for almost a year, Klaus worked with the founder at OnePlus to get the company ready for a transaction. For much of that time, Klaus worked out of our offices with his full-time job of getting this deal done. In addition to Klaus, we recruited a long-time venture and PE-backed CFO Jay Alter to join the company to help get all the systems and processes up to code as well as help us with acquisitions. Jay was the founding CFO for a very successful Chicago-based software company called Edline where he helped shepherd the business from start-up to $40 million in revenue, through several acquisitions and ultimately its sale to the public education technology company Blackboard.
An experienced team of long-time OnePlus-ers who build our products, service our customer and run day-to-day operations still surrounds Klaus and Jay. Our plan going forward is pretty straightforward . . . how do we expand our relationships with our current customers; who else can we sell our current products to; what other products should we develop and acquire; can we partner with others to reach more geographies; can we enter adjacent markets with our current technology?
To pull this off, we have started our typical long-term planning process alongside our internal operating team and operating advisors. As we get to know the current team better, we’ll know what skills we need to add to support our growth. As we interview customers and prospects, we can build a product roadmap and acquisition plan. Our first step is to upgrade the internal systems to remove single points of failure and to start giving our team the data they need to make better decisions. Next is to accelerate new product development and bring in our advisors to help variablize the cost in the process. At the same time, we are updating the company’s messaging, implementing Salesforce.com to track prospects and existing customers as well as putting pricing and partnership guidelines in place.
We acquired OnePlus without using any debt to give us the flexibility to invest in people, products and process early in our ownership. Having to adhere to short-term covenants out of the gates can sometimes limit your options, and we are confident in the opportunity ahead of OnePlus that we can address the capital structure down the road. With such high margins and strong revenue visibility, we are spending our first year making the right investments to support the long-term value that might require sub-optimizing profit margins upfront.
Our team is excited to talk trash any time, so if you have ideas for partnerships, customer introductions, acquisition ideas, or if you want to join the team at OnePlus please give us a call.