More Master Money Mania

Bridgepointe just got $100 million dollar investment from private equity firm Charlesbank CP. With the this tranche of dough, the master agencies have raked in about half a billion dollars in my estimate. Upstack, AppSmart, Telarus, Avant and Bridgepointe – and probably a couple of other smaller, un-hyped deals – makes a half a billion in investment. This won’t grow the revenue – it just moves from one partner’s books to the master broker’s P&L. This won’t create a marketplace or ecosystem or even a clunky e-commerce website for procuring telco and tech. This simply moves money around.

All of this in hopes of an exit.

If Jay is correct, and the procurement moves from channel to marketplace, and no one can build that marketplace, what happens?

Marketplaces work great for SaaS. Any software can find its way into a marketplace – just look at Google Play. Getting traction is tough for a marketplace unless it is an ecosystem of an anchor software like Salesforce. But this is off course.

Today’s announcement marks the tipping point. My guess is that more money follows this. Notably, TBI and PlanetOne have not taken money (because it would have to be walking away money.) Personally, I don’t want my deals in a PE-owned Brokerage. What happens IF/WHEN they don’t pay me? They certainly aren’t making these brokerages a swiss watch from my experience. This leaves a great opportunity for a regional broker to become a national player filling the gap. It would just take great marketing.

This tips over because all this money won’t produce a four-fold increase in revenue. Even if 4x the deals come in, how do they scale to handle it – and they only keep a portion of it! One million dollars in billable revenue is about $250K in commissions, whereby at least 70% is paid to the partner. That leaves $75K at the broker on $1M in billing. I’ll leave that there to ruminate.

I don’t see how this plays out. Where the exit is. SPAC?

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