Tercera looks to invest in cloud professional services firms

Tercera, an investment and advisory firm, is looking to invest $225 million in consultancies and MSPs that are at the vanguard of what founder Chris Barbin calls the "third wave" of cloud computing.

Barbin in 2006 co-founded cloud consultant Appirio, which global systems integrator Wipro acquired in 2016. As CEO of Tercera, Barbin will aim to tap into that experience, as well as his more recent work at GGV Capital, to help cloud professional services companies scale their businesses.

Tercera, which formally launched on Thursday, plans to invest in two tiers of companies: businesses with $5 million to $10 million in revenue, and larger firms with $20 million to $50 million in revenue.

Tercera will typically make individual investments of $5 million to $20 million, taking minority stakes in the companies it funds. Barbin noted that the company isn't pursing a rollup strategy. "We don't want to come in and take control and bolt a bunch of [companies] together," he said.

Tercera partners with Trilantic North America, a private equity firm, and a network of individual investors. Tercera has made its first investment, which the company will disclose in a couple of weeks, Barbin said.

In its upcoming investment activity, Tercera will focus on companies driving the cloud's third wave, which Barbin said is characterized by multi-cloud environments, inter-enterprise connectedness, and a core group of ISVs that include Salesforce, Snowflake and Twilio. Third-wave cloud professional services providers tend to possess technical proficiency in DevOps and multi-cloud, focus on end-to-end business processes, and maintain industry-specific IP and partnerships, he added.

Counsel and connection are what a lot of the entrepreneurs want and need to get to the next stage of growth.

The firm has set its sights on service providers and consultants that specialize in analytics, automation, data, security, and cloud technology enablement and management. The universe of buyers for such companies include global integrators, large-scale private equity firms and enterprises seeking to establish their own internal digital engineering services capabilities, Barbin said.

Tercera's services focus will enable the company to differentiate itself from software-oriented investors and private equity firms that pursue services deals as an outgrowth of a technology emphasis, according to Barbin. In addition to capital, Tercera will provide access to best practices and playbooks for running a service business. The firm is also building an Advisor Network, which will consist of experts in areas such as go-to-market strategy, governance and alliances. Over time, those experts and advisors could potentially join the companies in Tercera's investment portfolio as board members, executives or consultants, according to Barbin.

"Capital is the easy part," he said, noting the abundance of capital in the market. "Counsel and connection are what a lot of the entrepreneurs want and need to get to the next stage of growth."