LightEdge Acquires Connectria To Round Out Each Other’s Power Play

April 22, 2024 Timothy Prickett Morgan

If there is a large group of IT customers who pay a premium for a premium product but who are also going to be experiencing a skills shortage in the coming years, then you want to be in the position of selling them networking, compute, and storage capacity in the cloud or in co-location facilities. And you also want to be able to sell them add-on managed services to get a bigger share of their overall budget while also helping them to get more things done.

That, in a nutshell, is why LightEdge Solutions is acquiring Connectria Hosting. Both companies are from the American Midwest, both companies are familiar to readers of The Four Hundred, both companies have aspirations in the IBM Power installed base, and both companies were backed by their own private equity firms hoping to capitalize on the opportunities in Power and in hybrid cloud. But in this future hybrid cloud world, size matters and these two companies have complimentary skills and services that can be woven together in a more compete solution stack that can be sold to a broader set of customers in North America and, someday, beyond.

We heard rumors last year that private equity firm Bregal Sagemount, which is headquartered in New York City and which took a majority stake in Connectria in 2017, was interested in selling the company. Bregal Sagemount was itself founded in 2012 by people who came from Goldman Sachs and Great Hill Partners, and Gene Yoon, who is the managing partner at the PE firm, was in charge of private capital investing at Goldman Sachs. The company has raised $5.61 billion in four funds and has $5.5 billion in assets under management.

Connectria was founded in 1996 by Richard Waidmann in St Loius, Missouri, and the company he created was originally a software development and IT infrastructure consultancy. Two years later, as part of the first wave of utility computing and application hosting – remember Application Service Providers, or ASPs during the Dot-Com Boom? – Connectria added IT hosting as part of its services and the transformation of the company to a hosting focus was off and running.

Four years later, it had more than 100 enterprises using its hosting services, and five years later it had over 500 customers. Everyone watched the explosive rise of Amazon Web Services in the middle 2000s, and in 2012 Connectria added managed services for AWS for companies wanted to pay for babysitting for their rented AWS capacity. In 2017, just before Connectria was acquired by Bregal Sagemount, the company deployed a homegrown cross-platform cloud management platform, which is called TRiA and which is one of the reasons why LightEdge is interested in acquiring Connectria. (This is also why Microsoft has partnered with Skytap for Power-based cloud infrastructure – because Skytap had an easy way to manage hybrid infrastructure.) TRiA can manage on-premises infrastructure based on VMware and PowerVM hypervisors and Kubernetes containers as well as instances on AWS and Microsoft Azure.

With the backing of Bregal Sagemount, Connectria acquired WSM International in November 2019, which had expertise in helping customers migrate to AWS and Azure and which had more than 500 of its own customers. Since that time, it looks like Connectria has had more than 1,000 customers, but it has not grown beyond that number. The $10 million deal it inked last November with AWS was as much about helping to broaden the Connectria customer base as it was to give AWS something to sell to Power Systems shops.

That brings us to LightEdge, who we coincidentally profiled back in December last year. While Connectria started out as a custom software consultancy and eventually became a cloud/hosting provider, LightEdge was founded in 1996 in Des Moines, Iowa, under the name of Lighthouse Communications, and it was the big Internet service provider in that Midwestern city. In 2004. LightEdge raised $5 million from PE firms Equity Dynamics and Principal Financial Group, and in 2008, billionaire investor Philip Anschutz bought LightEdge for an undisclosed amount. In July 2018, LightEdge got $62 million from Anschutz to buy two datacenters from OnRamp Access in Austin, Texas, which cost $106 million. In 2021, private equity firm GI Partners, which is famous for creating the Digital Realty datacenter operator, acquired LightEdge from Anschutz for an undisclosed amount and said that LightEdge company would be the kernel on which it would grow its investments in cloud service providing. To that end, LightEdge acquired Cavern Technologies in September 2021, NFINIT in April 2022, and bought a datacenter from Stream Bank Data Centers in January of this year.

These days, LightEdge has more than 30 megawatts of aggregate datacenter capacity in more than a dozen datacenters located in Des Moines, Kansas City, Omaha, Austin, Phoenix, Minneapolis, and Raleigh. And now Connectria gives LightEdge a set of services to overlay onto these datacenters and its national network – and expertise in creating hybrid infrastructure with Azure and AWS. It also leases datacenter capacity in Philadelphia, and Dallas and, thanks to the AWS relationship, in Singapore.

From what Matt Biegacki, chief marketing officer at LightEdge, who was just brought in this year and who was chief marketing officer at Connectria for many years before that, tells us, it looks like LightEdge wants to build infrastructure and not just sell services atop the existing clouds, whether they are based on X86 servers or Power Systems iron.

“On the LightEdge side, there has definitely been a bigger emphasis on the infrastructure side, where we actually own and control the systems,” Biegacki tells The Four Hundred. “We think there’s quite a bit opportunity there, and we do think there is going to be a lot of opportunity for us to focus more on the infrastructure side in addition to the services aspect of this. There’s margin in it. There’s margin as well as AWS. As we start looking at the cost structure, we feel that we can really compete and offer cost advantageous solutions for our that customer base, because I do think as much as the public cloud guys focus on optimization and focus on that, it really has been a compute and consumption game the entire time. And now we’re starting to look at all the other services because compute is not enough, and customers need storage, need networking, and need power. And we need to make sure that we’re providing solutions that are in line and more cost effective than what customers are typically buying.”

With the merger of the two companies, LightEdge now has over 2,000 customers and it is a good place to start building from there. The LightEdge now has two great brands that are well known for different things, and over the next six months, it will be focusing on integrating the two companies.

But after that is done, we can expect for GI Partners to acquire again. . . . IBM is going strong in the Asia/Pacific region, and it would not be surprising to see some deals to bolster LightEdge on the other side of the globe.

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