Cherwell Software LLC landed $50 million from investment giant KKR on Friday in the largest venture capital investment in a Colorado Springs-based company in nearly 17 years.
The investment - to make acquisitions and expand its information-technology service management software product line - probably will be used to acquire another company with "complementary" technologies, said Cherwell Chairman Vance Brown, who declined to disclose potential targets. Cherwell in December acquired Advanced Marketplace, a Tampa, Fla.-based consulting firm with about 20 employees that develops software that will add human resource, facilities and security management features to Cherwell's products. Cherwell specializes in software that keeps computers, network and other information technology equipment running properly.
New York-based KKR, which manages nearly $130 billion in private equity and venture investments, made the investment through its $711 million Next Generation Technology Growth Fund, which invests in technology, media and telecommunications companies and this month acquired a majority stake in Optiv Security, a Denver-based cybersecurity provider. KKR's investment in Cherwell is the largest in a local company since email provider USA.Net received $60 million in March 2000, according to data compiled by Dow Jones VentureSource.
Brown said the funding will help Cherwell overtake industry leader ServiceNow, which generated $1.4 billion in revenue last year producing IT management software and is Cherwell's primary competitor. Privately held Cherwell doesn't disclose revenue or earnings data.
"This will give us the resources to accomplish that goal," Brown said. "Our growth is accelerating, and while we are already considered a global leader, we want to be the best service management platform in the world. We believe that we have more modern technology that will allow us to overtake them."
As part of its investment, Vincent Letteri, director of KKR's private equity and technology, media and telecommunications industry growth team, will join Cherwell's board, replacing Richard Mueller, CEO of Colorado Springs-based Peak Investment Advisors, who will move into an advisory role. The board also includes Brown; the company's two other founders, Tim Pfeifer and Arlen Feldman; Cherwell CEO Craig Harper; service management industry pioneer Ron Muns; and Richard Wells, a managing partner of New York-based Insight Venture Partners, another major Cherwell investor.
Insight pumped $25 million into Cherwell in 2012 to help the company in 2014 acquire Express Matrix, a small Seattle information technology company that specializes in helping companies inventory software and IT equipment, track software usage and ensure software usage remains in compliance with license terms.
Cherwell plans to continue expanding its 450-person staff, adding about 200 people last year and an additional 100 hires are expected this year mostly in research, development, marketing and sales, Brown said. Most of the growth is expected in Colorado Springs, he said, but the company also operates offices in Denver, Seattle, Tampa, Australia, Germany and the United Kingdom. The company moved its headquarters in 2015 to the InterQuest Corporate Campus, a former computer storage manufacturing plant, to consolidate several offices and accommodate its expansion plans.
KKR, started in 1976 by Jerome Kohlberg and cousins Henry Kravis and George Roberts, is best known for its 1989 acquisition of RJR Nabisco, then the largest leveraged buyout and featured in the best-selling book and movie "Barbarians at the Gate: The Fall of RJR Nabisco."
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