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We had a good day yesterday at Mobius VC as MCI announced they were acquiring NetSec for approximately $105m.
My partner Rex Golding has been involved since NetSec’s first venture round in mid 2000. As this investment was done at the peak of the bubble, we – like many other venture firms – were investing heavily in the promise of companies that provided “managed services” and were labelled “managed service providers (MSPs).” In many cases, post-bubble, the outcome of these companies was disappointing. NetSec – which specializes in managed security services (being one of the notable “MSSP’s”), built a very strong government practice, and has a deep, experienced leadership team. Things were challenging for the company in the 2001 – 2002 time frame, but everyone was patient, the team continued to systematically build a solid business, and has seen phenomenal growth the past 24 months.
Several months ago, another significant MSP – Inflow – was acquired by Sungard. As with the MCI / NetSec acquisition, this was a successful exit for Inflow (disclaimer: I’m an investor in one of the VC funds that was invested in Inflow), and give the well worn theory that two data points makes a trend, may be the beginning of positive exit activity for the MSPs that survived the downturn and built sustainable businesses in 2003 and 2004.
One of the key themes that has been floating around recently in the venture business is that the patient capital through the downturn (e.g. folks that hung in there with solid businesses in 2001 and 2002) is starting to be handsomely rewarded for their perseverance. We’ve had a few nice cases of this in the past 12 months – such as IAC’s acquisition of Service Magic – and a number of my colleagues are also seeing solid successes for companies formed in the 1999 – 2000 time frame.
Congrats to Rex, Glenn Hazard, and the team at NetSec!