Third Wave

Tercera launches to invest in people, not products

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Tercera Looks to Accelerate Technology Professional Services Businesses Specializing in the Third Wave of Cloud Computing

EVERYWHERE – Jan. 28, 2021 – Tercera, a new growth-focused investment and advisory firm specializing in technology professional services, launched today to accelerate consultancies and managed service providers in the $460 billion cloud services space. Tercera will put $225 million in equity capital to work building the next generation of cloud leaders, focusing on services firms that specialize in analytics, automation, data, security, enablement and management of cloud technology.

The company, which is led by a team of seasoned investors and advisors who are deeply ingrained in professional services, is on a mission to empower the people and businesses who make technology work. Spanish for Third, Tercera provides those leading the cloud’s Third Wave with the capital, counsel and connections they need to scale faster, do more and achieve outsized outcomes in today’s digital age.

CEO Chris Barbin founded Tercera based on his experiences as the co-founder and CEO of Appirio and his recent work as a Venture Partner at GGV Capital. Appirio, a pioneer in cloud services, was among the first enterprise services partners of Salesforce, Google, Workday and AWS. Barbin led Appirio to be one of the largest cloud consultancies before it was acquired in 2016 for $500 million. The Tercera team is seeking to help other services companies achieve similar success in a market segment that has been historically neglected by other investment firms.

“We believe the professional services space has been underserved by investors for too long, especially as it becomes clear just how important these partners are to customer adoption and market growth,” said Chris Barbin, founder and CEO of Tercera. “Cloud professional services is already a massive market opportunity, growing more than 20 percent year over year. With the pandemic driving more digital connections with customers, partners and employees, and enterprise cloud adoption happening faster than expected, we believe this market is poised for significant growth over the next few years.”

“Businesses rely on cloud computing like never before and it underpins so much of the innovation happening in technology, so it’s not surprising cloud professional services are booming on G2,” said Godard Abel, founder & CEO of G2, the world’s largest B2B tech marketplace. “Businesses are in dire need of systems integrators and managed service providers who can help them manage their increasingly large and complex cloud deployments, and yet the capital flowing into this space has significantly lagged investment in the technologies themselves. Tercera fills a gaping hole in this area, and we’ll be closely watching the firm’s portfolio in the coming years.”

Trilantic North America, a private equity firm that manages aggregate capital commitments of $9.7 billion, partnered with Chris to form Tercera, joined by a network of individual investors aligned with Tercera’s people-first vision. Tercera looks to partner with services firms that are founder-led, growth-focused and cloud-driven.

Tercera typically takes a minority stake in companies, investing between $5 million to $20 million of capital, selectively partnering with other firms and strategic investors as businesses scale. However, the company will provide more than just growth capital. It is also building out a services-oriented Advisor Network that will provide practical and diverse guidance and support to founders.

“Capital is only one component to growth,” continued Barbin. “Experienced guidance and a support network play an equal role in helping founders and teams scale faster and more gracefully than they could on their own. The Tercera Advisors are services professionals who have built, bought and sold services organizations, or run critical functions in services businesses. They bring the pattern recognition, diversity and playbooks that growth companies need.”

Useful Resources
Definition and players in the cloud’s Third Wave
Read Tercera’s people-first manifesto
Connect with Tercera on LinkedIn
Follow Tercera on Twitter at @TerceraCapital
Follow Tercera’s blog for news, trends and advice in cloud services

About Tercera
Tercera is an investment and advisory firm founded to accelerate the growth of people-centric businesses. Specializing in the $460 billion cloud professional services market, the Tercera team is composed of invested operators who know first-hand what it takes to build and scale a successful cloud services business. Tercera (Spanish for ‘third’) is on a mission to identify the people and partners who will lead the next wave of cloud computing – the Third Wave – and provide them with the capital, counsel and connections they need to scale faster and take an outsized share of the market. For more information, visit: https://www.tercera.io/.

Empowering the people and businesses that make technology work

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At Tercera we have a pretty simple mission: To empower the people and businesses that make technology work. “People” being the crucial word here.

Everyday we hear how technology is reshaping the world in profound ways — from the Artificial Intelligence in self-driving cars, to the Machine to Machine interactions (or IoT) responsible for our smart devices, to 3D printed hearts and homes, to the genome editing technology that made it possible to create a COVID-19 vaccine in months rather than years.

We pour trillions of dollars every year into advancing products and technology, but forget technology is of little value without the people who invent, design, develop, deploy, integrate, test, use, secure, manage and advance it.

So why is it that people-centric technology services firms (the integrators, consultancies, and managed service providers) get so little attention from the investment community?

Isn’t it surprising that the venture capitalists who pride themselves on identifying the next big thing overlook the fact that technology – especially information technology (IT) – rarely makes it big without talented people who have the special skills to put it to real use.

Over the last 25 years of building, leading and advising IT services organizations, I can’t tell you how many times VCs told me “why not stick with products?” or “sorry, we don’t do services.” When my co-founders and I were building Appirio in 2006 to capitalize on the then nascent enterprise cloud computing market, we heard “no thank you” from more than 25 different investment firms before Jim Goetz and Sequoia Capital took a bet on us. A bet that panned out when we eventually exited for $500M in 2016.

 

Services Doesn’t Suck

The IT services market is not small.

In fact, by 2021 it’s expected to be a $1T market (Grand View Research) and the outcomes for services firms are nothing to sneeze at. Just take a look at EPAM, an IT engineering services whose market cap at the time of this writing is more than $19B. Or the likes of Globant and Endava, next generation publicly traded services companies that trade at premium multiples unheard of for IT services companies just a few years back. There have also been plenty of impressive exits and mergers over the years for IT services companies. While they might not be at the same valuations and multiples as software companies with an 80% profit margin, the value of these firms has been steadily increasing as the war for engineering and IT talent rages on.

Here are a few more reasons why we believe services companies deserve a closer look:

  • They are undervalued relative to the often bloated valuations of software companies. Because so few investment firms seek out and truly understand the dynamics of professional services firms, and these firms can be self funded in some cases, competition for deals is less fierce. This means valuations haven’t been driven through the roof like product companies have.
  • They have a much easier path to profitability. Most IT services companies are profitable out of the gate because their “assets” can get to work right away. They don’t require years of development like a product might before they start bringing in revenue. And when demand and margins are high, many of them can actually throw off cash.
  • They require less capital investment. Series A funding rounds have grown steadily over the years, and as of January 2021 average about $25M according to some sources, whereas the average early stage round for services firms is much lower — namely for the reasons mentioned above.
  • They often have far more predictable, stable and non-linear revenue than investors expect. Services companies are thought of as unpredictable and lumpy by some, but with the right combination of customer retention strategies, embedded IP and managed services offerings this doesn’t have to be the case. These strategies can often drive growth that is non-linear to headcount additions, an often cited issue by the VC and PE community.

Plus, it’s just a lot more fun and rewarding to invest in people than 1s and 0s. In fact, I can think of no greater mission than one focused on people.

 

Services Businesses are Different

There are of course some fundamental differences between people-centric organizations and those built around products and technology.

For one, leadership, company culture, and having the right things in place to recruit, develop and manage talent is a much bigger priority in services companies where people are the key asset, unlike software companies. People aren’t binary the way code is, and talent (especially talent that is in high demand) has certain needs and expectations.

Then there are differences in how you plan and forecast, how you organize and enable sales, how you go-to-market and what elements of marketing you prioritize, and the importance of channels and alliances in how you scale. All of these areas look different in a people-centric organization compared to a product-centric organization, and they are constantly evolving. Especially as outcome-based pricing, pre-packaged IP, renewable services and vertical orientations gain steam.

I could go on, but my point is that different shouldn’t equal “bad” or “hard.” It’s just different. Once you appreciate those differences, you can hone investments, priorities and processes accordingly. The problem is that most VCs and PE firms have a playbook, and that playbook is optimized for product companies. Not people.

 

What Makes Tercera Different

When it comes to people-centric businesses, the Tercera team has learned a great deal about what works and what doesn’t over the last 30 years based on real-world experience. We are all services business veterans who have developed the pattern recognition it takes to know when it’s time to grow or time to slow, when to double down in a market and when to expand, and most importantly, what elements must be in place to scale a successful, sustainable business.

We’ve learned from our successes, but also from our mistakes. We believe it’s this insight, along with the industry connections we’ve built over the years, that can help the next generation of service businesses quickly grab market share, and build highly scalable businesses that go on to do great things.

We realize that there are thousands of investment firms out there, with more popping up every single day. Our goal is to make sure we aren’t like everyone else. That we offer something different, and do things differently. This is why “different” is one of our core values.

We don’t fit easily into a category. We’re a unique balance of venture capitalist and private equity, where we look to both build something new and make something more profitable and operationally sound. As former operators and entrepreneurs, we look at opportunities through those two mindsets — not just what looks good on a spreadsheet.

We realize that great founders with a great business can get capital from any number of sources. So while we are primarily an investment firm, we believe our real value is our services-centric counsel and connections we can provide, not only from our own experience but through our Advisor network as well.

Tercera’s Advisors aren’t a loosely connected group of people put together to fill up a website. It is a curated, highly experienced and invested community of professional services professionals who have walked in the shoes of our founders, or led critical functions within successful services businesses.

That focus, a core value for us, helps set us apart. Tercera is razor-focused on investing in people-centric technology businesses, however, our first fund is even more targeted on the $460B cloud professional services space. This, along with our real world experience in these spaces, allow us to go a mile deep rather than a mile wide, and make us infinitely more valuable and successful in our endeavors.

We also strive to have a different vibe than your traditional investment firm. While we take our work seriously, we try not to take ourselves too seriously. As a team, we’re pragmatic, approachable, honest, optimistic, and appreciative. In short, we’re fun (our last core value). We want to be the kind of team who you want to work with during these exciting times, people who you aren’t afraid to call when things go wrong and who you want to celebrate with when they go right. Because building a business might not be easy, but it should be fun.

This is who we are as a team, what we believe, and what you can depend on when you work with us.

Looking for a new breed of cloud-driven professional services firms

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While Tercera’s mission centers on empowering the people and businesses that make technology work, our investment thesis is a bit more focused (we believe strongly in having focus). More specifically, we invest in professional services firms that are defining and driving the next wave of cloud computing. We call this next wave, the Third Wave, and it’s why we named the firm Tercera (Spanish for third).

We believe the Third Wave is the biggest wave yet now that cloud technology is no longer the new kid on the block. In the last 20 years, cloud computing has fundamentally changed the way we do nearly everything, and the days of arguing whether enterprises are ready for the cloud or which cloud is better are long behind us.

Since the 2000s, when the First Wave hit, companies have been wading into the cloud in varying degrees. That first wave, driven largely by the dot.com bust and 9/11, was mainly focused on SaaS applications, department-centric apps that were focused on improving productivity. Think Salesforce for sales teams, ServiceNow for service teams, Workday for HR teams, and Concur for finance teams. You get the picture.

During the next decade the cloud’s Second Wave formed, fueled at least partly by the 2008 recession. In this wave, cloud platforms took root in the enterprise. Productivity was still important, but with businesses struggling, profitability and performance became more important. In this wave, we saw the rise of Amazon Web Services, Microsoft Azure, and Google Cloud, while First Wave software vendors acquired and developed their own platforms to expand their foothold in the enterprise.

We’re now in the Third Wave, which like previous waves builds on those earlier waves. Productivity, profitability and performance are all driving forces for cloud adoption, but now it’s also about creating connections and optimizing existing processes in an increasingly digital world. Companies of every size that are no longer new to the cloud are finding new ways to create their own unique, customer-centric digital experiences using hundreds of cloud building blocks. And they need help.

Digital experiences aren’t created with the snap of a finger. They require people. People who have the insight, skills and proven knowledge to design, develop, implement, test, manage and evolve these experiences, and those people are not easy to find. It’s one of the reasons why we’re already seeing an influx of capital investment in training programs and people-based businesses, and it’s why we believe the Third Wave is going to be huge for professional services.

 

The Opportunity for Cloud Professional Services

The cloud professional services category is already a $460B market growing north of 20% YoY. Nearly 7500 systems integrators already call this category home. And with 34% of companies planning to accelerate their cloud migration plans post pandemic (BCG) and enterprises speeding up their digital business initiatives by three to six years, we believe those numbers are poised to grow — opening up a huge opportunity for new software vendors and their partners.

The software vendors that led the first two waves of the cloud – companies like Salesforce, ServiceNow, Amazon, Microsoft and Google – will continue to play a big role in this Third Wave. One only has to look at the amount of M&A activity among these firms to see that.

However, there is a new set of software providers experiencing huge growth in this next wave. Vendors like Okta, Twilio, HashiCorp and Snowflake(just to name a few) are giving enterprises the tools they need to manage their increasingly complex hybrid-cloud environments, to fortify their security position, and to take advantage of the innovation happening in DevOps, AI and RPA (just to name a few). And these vendors have just begun to build out their partner ecosystems.

Together with our capital partner Trilantic, Tercera researched 30 of these Third Wave vendors and discovered that while Salesforce, Amazon, Microsoft, and Google all have thousands of service providers in their ecosystems, many of the emerging vendors have fewer than 300 partners. Until recently, many of them have been able to rely on a bottom-up adoption scheme, which works to a point. But in order to embed cloud systems into an enterprise, you need people who can handle everything from the integration and implementation to the training and ongoing maintenance.

It’s here where opportunity lies. Especially for the cloud-driven professional services firms that can bring the technical chops, delivery models and outcomes that these new vendors need from partners.

Just as Salesforce looked to the first generation of cloud-driven services firms — that delivered faster results, had more agile processes, and teams with specialized skills that the Global Systems Integrators didn’t yet have — this new generation of vendors will demand a new breed of partner.

These are the partners we are looking to identify, to partner with and to empower. If you believe your firm is part of this new breed, hit us up here.

Charting a course for the Third Wave of cloud consulting opportunities

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I’ve been in the high-tech industry for almost 40 years and I’ve always been a ‘services guy’. That’s why when I saw Chris Barbin’s blog post announcing the soft launch of Tercera, he had me at “hello”. Let me give you a little historic perspective to explain why I think the founding of Tercera is so timely.

 

The Rise of IT Professional Services

I started my high-tech career in the 1980s as an industry analyst at IDC at the same time the computer and telecommunications industries were facing unprecedented disruptions. The introduction of the mini- and personal computers (PCs) fundamentally changed the way organizations acquired and utilized information technology (IT). And the divestiture of AT&T led to the deregulation of the telecommunications industry dramatically changing how organizations obtained voice and data communications equipment and services.

As I watched these industries quickly change, I also saw that the enterprises these computer and communications vendors served faced significant skills gaps. Gaps which limited their ability to quickly adopt the latest technological innovations and slowed the sales of new products. These skills gaps were being filled by a widening array of professional services firms, ranging from major companies, like Andersen Consulting, to local mom and pop consultancies. The escalating demands of these enterprises also fueled a boom in systems integration and outsourcing services that brought even greater attention to an increasingly influential group of global Professional Services (PS) firms – like CSC, EDS and Perot Systems – in the 1990s.

 

Dot.Com Era Spawns New On-Demand Services and Venture-Funded PS Firms

Rather than continue to sit on the sidelines as an industry observer, I decided to join a professional services start-up that was focused on filling a similar skills gap in the rapidly growing ‘internetworking’ segment of the market led by Cisco Systems. The company was called International Network Services (INS), and it caught the attention of three highly-regarded venture capital firms – Sequoia Capital, Canaan Partners and Sigma Partners – because it promised a higher rate of growth and profitability than traditional PS firms by combining highly repeatable project methodologies with software solutions derived from its various engagements. I became the director of strategic marketing and helped the company grow and gain industry recognition, go public, grow to over $300 million, and get acquired by Lucent Technologies in 1999 for $3.7 billion – over 12x revenues!

The 90s and the ramp up to Y2K not only sparked a surge in demand for IT professional services, like INS, it also spawned new ideas about how software functionality and computing power should be distributed and utilized. It was during the dot.com era that the idea of Application Service Providers (ASPs) and utility computing was born and caught the attention of VC and market research firms. However, the dot.com bust – along with the tragedy of 9/11 – caused the investors and industry analysts to abandon most of the early ASP and utility computing players.

Despite the demise of this segment of the market, I felt the idea of ‘on-demand’ services was going to regain its footing and attract renewed interest in the marketplace. And I made a big bet on this possibility by launching my own strategic consulting company, THINKstrategies, in 2001 to focus on the business implications of moving from physical, on-premise, packaged products to virtual, web-based, subscription services. Fortunately, Salesforce.com, Amazon Web Services (AWS) and a whole host of others gained success over the next decade to prove the viability and value of cloud-based solutions.

 

The First Wave of the Cloud Services Takes Hold In Departments Acquiring SaaS

Salesforce was one of the few companies that survived the backlash created by the dot.com bust and 9/11. And the early success of Salesforce and other Software-as-a-Service (SaaS) vendors represented the first wave of cloud computing. These SaaS vendors recognized there was increasing frustration among corporate end-users about the complexities and costs associated with traditional on-premise applications. They evangelized the virtues of SaaS primarily to address the specific needs of a single department – such as the sales department in the case of Salesforce.

Yet, what stood in the way of Salesforce gaining success wasn’t persuading sales professionals to give their new SaaS solution a try, it was helping them to quickly implement it within the broader department to prove its value to the business, not just a few individuals. The major PS firms weren’t ready to focus on this embryonic market opportunity, so a new generation of start-up consultancies, including companies like Bluewolf, emerged to fill the gap and help accelerate the deployment of the first round of department-centric SaaS solutions.

 

The major PS firms weren’t ready to focus on this embryonic market opportunity, so a new generation of start-up consultancies, including companies like Bluewolf, emerged to fill the gap and help accelerate the deployment of the first round of department-centric SaaS solutions.

 

The Second Wave of the Cloud Services Washes Across the Enterprise with IaaS and PaaS

The second wave of cloud consultancies appeared in the market as the concept of SaaS gained acceptance among companies large and small, and gave companies like Amazon confidence to apply the same pay-as-you-go model to the compute and storage side of the tech marketplace. Amazon Web Services (AWS) basically resurrected the utility computing idea of the Dot.Com era and ignited the Infrastructure-as-a-Service (IaaS) market opportunity.

Once again market acceptance and adoption were slow at first because the economic drivers weren’t fully in place and a skills gap still existed. The financial crisis of 2008 created the economic imperative for enterprises to look for new ways to cast aside their capital-intensive data centers of the past in favor of more flexible and economical cloud services. That new sense of urgency brought on by the financial crisis also forced many enterprises to turn to PS firms for help leveraging IaaS – along with Platform-as-a-Service (PaaS) – across their operations.

This second stage of cloud growth was not only predicated on application and department specific skills, but on enterprise-wide integration service capabilities to pull the solutions from various ISVs and other cloud providers together. A new wave of cloud-centric consultancies, including Appirio, that were helping the leading vendors capitalize on the rapidly expanding cloud opportunities.

 

Appirio Venture Funding Opens New Chapter of Cloud Services

I became friends with Chris Barbin shortly after he, Narinder Singh, Glenn Weinstein, and Mike O’Brien founded Appirio. Chris and Appirio caught my attention when the company received venture funding from Sequoia Capital, an accomplishment which only occurred occasionally since my days at INS. And when I saw it was another alum of INS, Jim Goetz, who was responsible for Sequoia’s bet on Appirio after Salesforce did the same, I knew this would be a new cloud consulting firm worth paying attention to. So, I reached out to Chris because I was one of the few independent analysts focused on the rapidly evolving professional services side of the cloud computing marketplace and interested in Appirio’s go-to-market strategy.

 

Chris and Appirio caught my attention when the company received venture funding from Sequoia Capital, an accomplishment which only occurred occasionally since my days at INS..I knew this would be a new cloud consulting firm worth paying attention to.

 

As it turned out Appirio’s strategy echoed many of the elements I had seen pioneered at INS. First, it was aligned with a major vendor – Salesforce. Second, it was providing a combination of rapid deployment and sophisticated integration services. And third, it was developing a highly repeatable methodology and productizing its solutions to give it greater scalability and profitability that made it appealing to investors.

The success of Salesforce and AWS attracted more competitors and created greater demand for multi-vendor integration services to not only successfully deploy the cloud alternatives and ensure they were being properly utilized. Appirio was in a great position to capitalize on this opportunity.

 

Strategic Acquisitions Prove Value of Cloud PS Investments

In addition to filling an important skills gap, professional services firms are the ‘trusted advisors’ for many enterprise decision-makers. As a result, they have helped drive significant revenues to cloud vendors. In fact, IDC estimates PS firms have sourced nearly two-thirds (64%) of the $1.2 trillion market opportunity in the Salesforce ecosystem alone.

 

In addition to filling an important skills gap, professional services firms are the ‘trusted advisors’ for many enterprise decision-makers. As a result, they have helped drive significant revenues to cloud vendors.

 

Although the first wave of cloud-oriented consultancies didn’t attract a significant amount of venture funding, it did create good exits among major ISVs, PS firms and other vendors seeking to augment their internal capabilities. For instance, Bluewolf was acquired by IBM for $200 million. And another fast-growing cloud consultancy, Cloud Sherpas, was acquired by Accenture for $350M-$400M. As Appirio became a market leader during this second wave of the cloud it too achieved an impressive exit when it was acquired by Wipro for $500M in 2016.

While these may have been the most prominent PS firm exits in the first two waves of the cloud, there were plenty of other PS acquisitions that didn’t get as much attention. In fact, the pace of acquisitions in the Salesforce ecosystem alone has accelerated over the past 2-3 years, and the assortment of ISVs and other vendors making these acquisitions has dramatically expanded as a list compiled by Channele2e shows.

PS firms continue to add cloud consultancies to their operations at a pretty fast clip, including IBM which most recently acquired Salesforce consultancy 7Summits. The ISVs themselves are making more and more strategic acquisitions as well. This includes Salesforce, which most recently acquired Acumen solutions and has seeded the entire market with investments in more than 50 service firms over the years through its Salesforce Ventures arm.

This latest flurry of acquisitions has not only validated the value of cloud consultancies but has created a need for a new generation of PS firms to address the escalating demands produced by the pandemic and the latest technological advancements.

 

Welcome to the Third Wave of Cloud Consulting Opportunities

Few enterprise executives have to be educated about what the cloud is or why it’s important anymore. And they don’t have to be convinced about the viability or value of cloud-based solutions, especially as a result of the global pandemic. They now need help answering where and how to take the greatest advantage of the power of the cloud to meet their particular corporate requirements and objectives.

If the first wave of the cloud was centered around departmental requirements like CRM to satisfy sales teams, and the second wave was focused on enterprise-wide data center migration and application integration needs – then the third wave of the cloud is aimed at extending the power of SaaS, PaaS and IaaS to support escalating inter-enterprise requirements at a global scale.

 

The third wave of the cloud is aimed at extending the power of SaaS, PaaS and IaaS to support escalating inter-enterprise requirements at a global scale.

 

While many organizations responded to the dramatically different demands of the global pandemic admirably to connect their employees remotely and accommodate their customers electronically, the systems that they quickly put in place still need a lot of work to ensure their ongoing viability.

Although everyone is looking forward to returning to some form of normalcy once vaccines push back on the coronavirus, most organizational leaders recognize that the way we work, shop, and interact has changed forever. Businesses and other institutions will become even more reliant on the Internet (i.e. the Cloud) to support their employees, customers, and partners. In fact, we’re entering an era in which most organizations will rely on multiple cloud providers to support various requirements.

And every enterprise will need to augment their in-house teams with external resources to meet these escalating multi-cloud needs. In fact, the demand for PS help will grow because most enterprises will be keeping tight reins on their internal operating budgets and be seeking outside expertise to help them fortify, extend, and transform their newly digitized business processes.

 

In fact, the demand for PS help will grow because most enterprises will be keeping tight reins on their internal operating budgets and be seeking outside expertise to help them fortify, extend, and transform their newly digitized business processes.

 

The population of new cloud consultancies will also expand to surround a broader array of strategic vendors. Salesforce, AWS and Microsoft have attracted much of the attention of cloud consultancies in the past. As other cloud vendors gain success – like Workday, ServiceNow, Twilio, Snowflake and Okta – they will also need independent cloud consultancies to help their customers adopt their solutions and expand their market opportunities.

I’ve always believed that the ultimate irony about the rapid rise of the “cloud” is that it has grown because it promised a simpler and more economical method of obtaining compute power and software functionality. Yet, in reality it has compounded the complexities, and costs for many organizations because it adds another layer of complications to the on-premise applications and data center operations already in place. You can see a clear illustration of this stark reality – during ‘normal’ times – when you enter the exposition hall of the Dreamforce conference and are immediately confronted with the largest professional services firms situated in the biggest booths at the front entrance to the event.

Organizations of all sizes – and cloud vendors of all types – need professional services firms with varying skills to make cloud solutions work in real-world environments. As a ‘services guy’, I’m excited about the additional opportunities for PS in the third wave of the cloud, and the investment opportunities for Tercera in the coming decade. I look forward to them identifying and building that next generation of cloud consultancies.

A quest to prove, once again, that services businesses don’t suck

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October marks the four year anniversary of Wipro’s acquisition of Appirio — an incredibly emotional day for me personally.

On that day I was so proud of what our team had built and excited to see where the journey would lead. Over the next 2+ years, I spent my time integrating Appirio into Wipro to help smooth the transition and to infuse elements of the Appirio culture into Wipro’s broader organization as the company’s first ever Global Culture Officer. In the years following, I joined various boards, started a few small businesses I’m passionate about, supported a number of amazing non-profits, and joined GGV Capital as a Venture Partner where I got the opportunity to work with an incredible group of founders and entrepreneurs.

About a year ago, after grazing across all these endeavors and enjoying the slower pace of ‘life on the lake’, I found I was craving more. I wanted to build something again. I wanted to have an outsized impact on an industry I cared about and a team I helped put together. The gravitational pull from friends, advisors, recruiters kept pushing me towards running a software business. While my history and track record has largely been in professional services, the software landscape was attractive. It was new, it was different, there were tons of opportunities, and as most investors will tell you, the exit economics tend to be a lot more favorable in software (provided you pick the right horse of course!).

Which got me thinking. Why does the professional services space get so short changed? While software is eating the world, it’s people who must build, deploy and use that software!

Why is the prevailing thought by VCs and PE firms that services sucks?! Sure, services businesses can be hard. Sure, people are harder to predict than 1s and 0s. Sure, services firms might not see the same kind of multiples as a software business. However, that doesn’t make them a bad investment. Just different. Appirio is a great example of how a services firm can still provide a great ROI for investors, and there are far more Appirios out there than you might think.

My gut, my personal fun factor, kept bringing me back to services. The question then became what should I do in the services space. Should I build another Appirio on the back of newer cloud technologies? Should I join an Appirio like firm as a COO, President? Should I invest in and combine a set of cloud services companies and join their board?

I knew I wanted to build something again, but through my VC and board experiences, I also realized how much I love helping others build as well.

Luckily, Jeff Richards and the GGV team allowed me to offroad a bit from traditional software themes while I was at the firm, and I had the opportunity to study the emerging cloud landscape. I saw the value and demand for third-wave cloud companies like HashiCorp, Twilio, Okta, Atlassian, Datadog, Snowflake, Splunk, Slack, as well as the ecosystems (or honestly, lack thereof) that supported them. We mapped out the ecosystem landscape of ~20 ISVs along with their roughly 7,500 services partners, and the opportunity slowly presented itself.

There is not a single new Appirio to be built here, but rather an opportunity to create a firm that can help scale dozens of firms across these ecosystems. An opportunity not just to deploy capital, but to provide thoughtful advice and guidance based on my own failures and successes. An opportunity to provide insight into the patterns, playbooks and best practices that can help a services company scale well past that $10M, to $100M and beyond, while connecting founders with industry experts who can provide the strategic and executional help they need.

This is why I’m so excited to introduce Tercera, our new company that is focused 100% on identifying and building the next generation of cloud professional service providers. Tercera, Spanish for third, will specialize in the third wave of cloud computing — specifically, the ISVs and their service partners who are providing the data, automation, enablement and security layer that is so critical for digital transformation.

We’re building Tercera to be a different kind of firm. Part growth equity, part advisory, part industry network. Our goal is to combine the best of these worlds to help founders gracefully scale and achieve outsized outcomes.

As of 10-15-20, Tercera has officially begun its soft launch phase. We’re already in the process of building out our team and our “neighborhood” of experts, have met with more than 40 firms across our target ecosystems. Stay tuned for our formal launch in the coming quarters, along with announcements on these first investments.

In the meantime, if you’re a third-wave professional services firm who thinks we might be a good partner for you, or an advisor who wants to join our quest, hit me up on our website or on LinkedIn.

Onward, again!

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