Private Equity Investment in RMIS Industry Continues to Grow
In recent years the RMIS industry has seen a flurry of private equity activity. Ten years ago, brokers were the largest investors in RMIS businesses. The market has recently shifted and now three private equity firms have made investments in RMIS firms.
In 2014, Symphony Technology Group, acquired the RMIS business unit of Aon Risk Solutions. The acquired company was renamed Ventiv Technology. Since the acquisition Ventiv has made a number of acquisitions in order to expand its portfolio and customer base.
A few years later, in June of 2017, Thoma Bravo acquired the majority of the shares of Riskonnect from its founders and executives. And most recently, in February of this year, Spectrum Equity, a leading growth equity firm, made a minority investment in Origami Risk.
So, what is private equity? Private equity is capital invested in companies that are not publicly traded on a stock exchange. Private equity (or “PE”) firms are formed by investors who want to directly invest in other companies rather than buying stock on an exchange.
I recently sat down with Bob Petrie, CEO of Origami Risk to understand more about their recent transaction and what to expect from it.
Pat: Tell us about the recent announcement of Spectrum Equity investing in Origami Risk.
Bob: Origami recently received a growth investment from Spectrum Equity. Spectrum is a leading growth equity firm focused on the information economy. They have been partnering with high growth companies across the information economy for more than 20 years. The investment represents a minority position and is the first institutional capital invested in Origami. The folks at Spectrum who we are working with have deep experience in building successful technology businesses and our partnership will facilitate access to additional insights and resources that we think will be helpful to us. We are looking forward to working closely with Spectrum to help achieve the company’s vision of continued leadership in risk and insurance technology.
Pat: What impact does this have on Origami and its clients?
Bob: Any impact on our colleagues and clients from this investment will be minimal. As a business owned and run by its management, our primary strategic focus is to help our clients be successful in meeting their business objectives. Our emphasis on client success drives our innovation and business model, which is centered on delivering the best available technology and deeply skilled experts. Both of our PE-owned competitors cut staff after the investment. We did the opposite – we have increased the rate that we are hiring in order to make sure that we are fully staffed to serve our growing roster of clients.
Pat: How did you choose Spectrum Equity as your financial partner?
Bob: The founders of Origami Risk started the company with our own capital and remained a “bootstrapped” company for more than 9 years. If you are with a successful business, you don’t need to look for investors. Instead, investors find you. I learned that there were many PE firms with money to invest, so over time I developed other criteria to narrow the list of PE firms that would be the best fit with Origami Risk. When we were ready for a financial partner, Spectrum was at the top of our list. They focus exclusively on technology and have a long track record of success. We also developed an excellent relationship with two of the partners there, Chris Mitchell and Mike Farrell, who are experts in their field and have been very helpful to us both before and after the investment.
Pat: What percentage of the Origami Risk shares did you sell to Spectrum and what price did they pay?
Bob: We sold Spectrum approximately 15% of the shares. We haven’t disclosed the valuation for Origami Risk that was the basis for the price paid, but we were very pleased with the financial terms of the transaction.
Pat: What are the similarities and differences in Origami’s approach to a financial partner compared to the other PE investments in the RMIS market?
Bob: We recognize that other companies in our industry have had private equity investors. Our relationship with Spectrum is structured very differently than those firms. Spectrum has a minority position in Origami Risk while Origami Risk’s management still owns most of the shares. We believe that our management team will be good stewards Origami Risk’s clients, colleagues and market reputation because we have deep RMIS experience and are long term investors.
Pat: What can we expect from Origami Risk based on this investment?
Bob: Our strategy hasn’t changed – we plan to continue to grow organically and will look for acquisition opportunities that we think add value to the company. Our values haven’t changed either – our first objective is to work hard for our clients who depend on our technology and service to do their jobs.