Software Empire v.2
As CEO of Epicor, a California-based company with two Minnesota software firms at its roots, George Klaus grew the company from a valuation of $30 million to $980 million in the 14 years before its spring 2011 sale to London-based private equity firm Apax Partners.
So why not come back to Minnesota and try doing it again? In December 2011, Klaus led a group of investors purchasing Bloomington-based Datacom, which provides enterprise resource planning (ERP) technology to manufacturers, primarily in the sign and print industries. In February, the renamed firm, KeyedIn Solutions, paid $8 million to purchase U.K.-based Atlantic Global, a project management and automation software developer. With offices in five U.S. locations as well as in the U.K. and Australia, Keyed-In Solutions specializes in providing small and midsize manufacturers and professional services firms cloud-based technology and consulting to help them improve their business operations.
The CEO of the new-old company is Klaus’s wife, Lauri Klaus. And she’s not standing still. In August, she expects to complete the purchase two additional firms specializing in software-as-a-service (SaaS) applications that are centrally hosted on the cloud. These added companies “would double or triple our projected size in the first 12 to 18 months following the acquisition,” she says.
Lauri Klaus expects a strong market for KeyedIn’s services. She projects revenues of $21 million by the end of the company’s fiscal year 2013 (which ends in April), $70 million by 2014, and $160 million by 2015. By 2015, she also expects 250 people will be working at the firm’s Bloomington headquarters (up from the current 60) and estimates the company’s valuation will be four to 10 times revenue.
Datacom has “a proven SaaS product, a very happy customer base, and a team of manufacturing experienced people in Minnesota,” Lauri Klaus says. “The opportunity was to take majority ownership and to utilize it as the foundation of our global ERP solution.”
The acquisition strategy is similar to that used at Epicor—creating a business-services software entity whose acquisitions provide complementary but not overlapping capabilities. One of the opportunities that the KeyedIn principals see is providing functionality that addresses every business process, along with the easy integration of a cloud-based model.
Don Roepke, former Datacom CEO and current KeyedIn board vice chair, worked closely with George Klaus at Control Data in the late 1970s and early ’80s. In 2011, as Datacom emerged from the recession, which had basically brought the firm’s sales to a halt for several quarters, Roepke received a call from the Klauses, who were leaving Epicor.
KeyedIn Solutions expects its acquisitions to result in a $160 million company by 2015.
“I was aware of George’s success at Epicor and he was aware of what we were doing at Datacom,” Roepke observes. “The attraction for Datacom was not the cash investment from George, but all the other assets that would come with it: his knowledge of the industry, his success in the industry, his wide base of contacts. I considered Lauri to be one of the top people in the industry internationally. I knew she could easily put together a top-notch team.”
Lauri Klaus joined Epicor’s staff when DCD, the Minneapolis firm she worked for, was acquired by software company Dataworks. Dataworks, in turn, was later bought by the company that became Epicor. As Epicor’s executive vice president of worldwide sales and services, she managed more than 1,400 staffers. As for the future of KeyedIn Solutions, “I can’t predict what we are going to do,” Lauri Klaus says. “We are focused on mainly building a great, viable SaaS company, where our executives have choices. And if it makes sense to do an IPO in three years, great.”