Ionic Partners Completes Sale of Gigster to Virtasant

Dramatic Transformation of Gigster Under Ionic’s Ownership

Ionic Partners, a global investment platform focused on the acquisition of ‘Second Chasm’ enterprise software companies, announced today the successful completion of the sale of Gigster to Virtasant, a leading provider of cloud optimization services. This sale crystallizes a dramatic transformation of the Gigster business since its acquisition by Ionic in May 2021.

“We are thrilled to welcome Gigster to the Virtasant family,” said Michael Kearns, CEO of Virtasant. “Gigster’s innovative approach to assembling cloud teams, combined with Virtasant’s cloud expertise, will enable us to deliver even greater value to our customers. We look forward to working closely with the Gigster team to drive continued growth and success.”

Ionic’s decision to acquire Gigster in 2021 stemmed from the team’s research-driven approach to understanding the future of work. Ionic developed an investment thesis around delivering scalable software solutions via the human cloud and identified Gigster as being uniquely positioned as an investment candidate.

Founded in 2014 and backed by well-established venture capital investors such as Andreessen Horowitz, Redpoint Ventures, Y Combinator and others, Gigster quickly built a roster of blue-chip customers and established a strong reputation as an innovative platform for the delivery of advanced software products, built by the best engineering talent in the world. However, despite having established itself as an early leader, Gigster was facing a number of business and financial constraints that threatened the company’s existence.

“At the time of Ionic’s investment, Gigster was saddled with operational and balance sheet issues that hindered the business and obscured the exceptional quality of Gigster’s products, employees, and customers,” described Donald Park, Co-Founder of Ionic Partners. “This is not uncommon among ‘Second Chasm’ companies – organizations with excellent products and people but burdened by misalignment among stakeholders.”

The successful sale of Gigster to Virtasant represents the culmination of a significant turnaround under Ionic’s ownership. In less than three years, Ionic Partners utilized its differentiated transformation approach, value creation strategies, and operational best practices to overhaul Gigster’s business. Ionic reconstructed Gigster’s operational framework, achieved profitability, expanded its employee base globally, and deepened strategic relationships with Fortune 500 clients, propelling the company towards strong growth and scalability. This growth was further amplified by Gigster’s acquisition of CodersRank, now Metrx, in 2023.

The strategic sale of Gigster to Virtasant also represents a significant milestone in Ionic Partners’ growth strategy and underscores its commitment to delivering exceptional value to its investors, partners, and portfolio companies.

Some highlights of Ionic’s investment in Gigster include:

Distinctive sourcing and evaluation: Ionic leveraged its extensive domain expertise to identify a unique investment opportunity.

Fast, fair, and disciplined partner: The acquisition of Gigster was completed in 10 business days – being fast, fair, and disciplined are all hallmarks of Ionic’s approach.

Immediate atomic-level operational focus: Ionic deployed its team of experienced operators and proprietary best practices and playbooks to accelerate transformation and reinvest in the business.

Organic and inorganic growth: Ionic drove revenue growth by focusing on providing more value to existing customers, achieving ‘100% customer success’, and expanding into new markets and products, including the CodersRank acquisition.

Finding the right home: Combining Gigster with a highly strategic acquirer in Virtasant provides Gigster’s employees, customers, and products with the best platform for its future growth.

Looking Ahead:
As Gigster embarks on this new chapter, Ionic Partners remains committed to identifying and nurturing exceptional investment opportunities. The firm will continue to seek out challenged but durable businesses, pursuing strong asymmetric return potential without typical early-stage risk.

About Ionic Partners:
Led by a team of seasoned software operators, Ionic Partners is a global enterprise software platform focused on Second Chasm companies with strong core products and recurring revenue. Ionic creates extraordinary value through a product-led thesis, leveraging a cloud-first global workforce, building elastic infrastructure, and infusing world-class operating best practices into the daily workflow of their companies.
For more information, visit

About Virtasant:
Virtasant is a leading provider of cloud optimization, cloud operations, product development, and outsourcing services. As a global team of cloud professionals in over 130 countries, we work with leading companies around the world to help them thrive in the cloud.
For more information, visit

Ionic Partners unites Edsembli and Sparkrock to forge a new powerhouse in Canada’s K-12 EdTech space

Ionic Partners announced the acquisition of Edsembli, a leading provider of ERP & SIS solutions for K-12 school boards in Canada, merging it with Sparkrock. This strategic move aims to unite industry leaders, enhance product offerings, accelerate technological advancements, and foster community collaboration for greater impact on student outcomes.

March 19, 2024 – Ionic Partners announced today that they have acquired Edsembli, a trusted provider of ERP & SIS solutions tailored to K-12 school boards across Canada. Ionic Partners will integrate Edsembli into its previous acquisition in the K-12 education space – Sparkrock. This strategic move unites two industry leaders in Canada, accelerating innovation and increasing scalability for their customers. Moving forward, Ionic remains committed to working closely with the unified Sparkrock and Edsembli teams, focusing on strategic value creation via Ionic’s proprietary best practices and prioritizing successful outcomes for each of the combined company’s valued customers.

By harnessing the strengths of both organizations, Sparkrock is set to deliver an enhanced suite of Finance, HR/Payroll, and SIS solutions. This combination will seamlessly blend decades of industry experience with cutting-edge technology, improve the speed of implementations, and accelerate the development of AI-enhanced solutions, ultimately helping school districts make a greater impact on student outcomes.

“Sparkrock and Edsembli will bring together two world-class organizations with truly complementary products in the K-12 space. We already share numerous customers & are united in our unwavering dedication to achieving 100% customer success,” stated Andy Tryba, CEO of Sparkrock. “Bringing these two companies together will empower both customer communities to benefit from our team’s extensive industry expertise and world-class products.”

Randy Lenaghan, CEO of Edsembli, shared his thoughts on the acquisition, “Joining Sparkrock marks an exciting new chapter for Edsembli. Our product suites, years of experience and organizational cultures complement perfectly. But this combination is not solely about merging products; it’s about reshaping how educational institutions leverage technology to achieve greater efficiency and impact.”

Key Highlights of the Acquisition:

  1. A Leader in Edtech for K-12 in Canada: This acquisition positions the combined entity as a leading ERP & SIS solutions provider for the K-12 education sector in Canada
  2. Comprehensive ERP & SIS Solution: The new Sparkrock will merge the ‘best of’ feature sets to offer a comprehensive ERP solution and an integrated SIS platform.
  3. Accelerating Migrations & Implementations: With additional resources & expertise – new and existing customers can now accelerate their move to the cloud and receive the benefits of greater flexibility, scalability, and security.
  4. Community Collaboration: Continuing to foster community-driven forums, workshops, and user groups, with a strong emphasis on knowledge sharing and collaborative growth.

Stacy Veld, Superintendent of Business Services and Treasurer at the District School Board of Niagara, a joint customer of Sparkrock and Edsembli, also shared her enthusiasm: “We are thrilled about Sparkrock’s acquisition of Edsembli. This merger brings together two highly regarded software enterprises in educational technology, promising us enhanced solutions and services. We eagerly anticipate the innovative changes and improvements that will support our system and day-to-day operations.”

About Ionic Partners

Led by a team of seasoned software operators, Ionic Partners is a global enterprise software platform focused on investing in businesses with strong core products and durable recurring revenue. Ionic creates extraordinary value through a product-led thesis and by infusing world-class operating best practices into the daily workflow of their companies.

For more information, please visit or follow @IonicPartners on Twitter

About Edsembli

Edsembli is a leader in ERP and SIS solutions for K-12 education in Canada. Their solutions empower educators to reshape the student learning journey. By integrating essential functions like human resources, payroll, finance, and student information management into a singular platform, Edsembli seeks to modernize educational institutions to meet the demands of contemporary education.

For more information, please visit

About Sparkrock

Since its establishment in 2003, Sparkrock has provided ERP solutions to Education, Nonprofit, Health, and Human Service organizations. Their ERP software, Sparkrock 365, is built on the highly reliable and secure Microsoft cloud platform. While most solutions are built for for-profit businesses, Sparkrock 365 is specifically designed to empower educational institutions with essential tools for thriving in the digital era.

For more information, please visit or follow @sparkrockinc on Twitter

5 steps for great video meetings while traveling

Imagine the day. Travel has opened back up and you’re dusting off that passport. Dormant airline miles are being used. You’re now loving your company’s newly minted remote work policy. You can’t wait to work from exotic locations around the world.

You’ve also mastered a great Zoom setup at home. But can you reproduce it in a hotel?

The answer is yes.

But it takes a bit of education & planning.

Here are 5 steps for great video meetings while traveling:

Step 1: Choose a ‘video optimized’ location

It goes without saying – but most rooms are setup for activities to occur within the room. Not for people on the other end of a video conference. So determining where to setup your temporary remote office is the first major decision you have to make.

The good news is that hotel rooms often have desks in them. But having your unmade bed in the video behind you isn’t professional. And if you’re like me – a couple of screaming kids in the background doesn’t help either.

I recommend asking your hotel if they have a Board room. Many hotels will often let you use it for free if it’s not in use.

Below is a Board room at a hotel I stayed at during spring break. The room is nice – but picking the right location within the room is key.

The natural inclination is to pick a chair in the middle of the table, place your laptop down and be on your way. But that would be a poor choice and not leverage the assets of the room.

Board room at Waldorf Hotel in Park City, UT

Another common mistake is to want the ‘pretty scene outside’ as the background and sit with the window behind you. As you can see from the picture below – the light coming from the window is too bright and your face will be dark/not visible in the camera.

Window is too bright for most cameras to focus on your face. Notice how dark the chair is.

Though counterintuitive – the best decision for this room is to pull the buffet table in front of the window and use that as your workspace. The natural light then shines on your face – and you get a great view during your meetings.

Pulling the buffet table in front of window was the optimized video configuration

Step 2: Arrange the right camera orientation

Nothing makes your video image look worse than the wrong camera angle.

Look at the picture below. On the left – you have a professional video setup (newscaster) and on the right, you have a guest with an amateur video conferencing setup.

Good Video Angle vs Bad Video Angle
Left image is the professional newscaster, Right image is the amateur

Though you’re unlikely to find a newsroom setup while you travel – you can easily recreate something close. The key is to ensure the camera on your laptop is at eye level and you sit far enough back to get most of your torso in the image. Here is a blog that dives into details about setting up the right camera orientation (How a stack of books can make your video conferencing 10x better).

To get your camera at eye level, you’ll often need to put the laptop on a stack of books or something else to raise it. For my hotel Board room above – I got lucky in that the buffet table was 7 inches taller than the Board room table. This brought the camera to near eye level (and a small adjustment of the chair height did the rest).

Top image: Taller buffet table, Bottom Image: Shorter Board room table

Step 3: Add depth to the background

Many people use virtual backgrounds nowadays (most poorly – but that’s a topic for another day). If you look closely at those images – you’ll notice that they make you appear as if you’re sitting in a large room. This adds ‘depth’ to the background to make it more interesting.

In the hotel room above – I moved the chair so that I was sitting parallel to the long side of the board room table. This made the table directly behind me and created the balanced ‘depth’ in my background.

See the picture below for what it looks like on video (and my head covered the ugly door). Ironically – folks on my Zoom calls thought it was a fake background. Success.

View of background during video meeting

Step 4: Use a noise-cancelling microphone

Unlike doing video meetings at home – it’s hard to predict what random noises will come from the hotel hallway. And playing the mute/unmute game never works well.

So instead – use a noise-cancelling software like Krisp. There are a few software providers out there and they all work great to eliminate unwanted background noise while isolating your voice. I’ve even taken video meetings from noisy hotel lobbies – and participants in the video meeting couldn’t tell the difference.

Another benefit of using Krisp is that it removes the ‘large room’ echo. For big hotel rooms like the one above – this comes in handy.

Step 5: Bring a USB microphone

People often use AirPods or other bluetooth headsets with laptops. But the microphone audio quality of most of them are terrible (sorry Apple). For truly ‘podcast’ audio quality during meetings – I recommend a USB directional microphone for your laptop.

I use the Movo 1000 since it’s slim and fits into my laptop bag easily. It’s also USB powered so it doesn’t require a separate power cord to lose. And at $58 on Amazon – it’s an inexpensive way to have perfect audio.


It’s unclear exactly when travel will pickup again. But it is clear that a ton of folks will be working from random destinations when it does happen. And if you follow these simple 5 steps – you can work from any hotel room and still maintain a professional video setup.

Safe travels.

And if you’re looking for more advanced lessons – see this article.

If you have any questions – please feel free to DM me on Twitter at @andytryba.

How does remote work accelerate the BCorp movement?

Milton Friedman

The Nobel winning economist Milton Friedman famously stated “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” 

But is that really true? 

Or is there a much larger responsibility that businesses have to society & to our kids? 

The invention of the ‘B Corp’ and the participation of 3500 corporations across 70 countries points to a differing point of view. 

What is a BCorp? 

Benefit Corporations, or shortened to BCorp, is a new type of corporation that was invented in 2007. BCorps balance purpose with profits. 

Here is a quick 2 min overview of BCorps:

The official definition comes from B Lab – the nonprofit behind B Corps: 

Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.” 

BCorps go through a rigorous certification and agree to uphold a shared ‘Declaration of Interdependence’. 

A what? 

The BCorp Declaration of Interdependence?  

The Declaration of Interdependence is a ‘code’ that all BCorps agree to. The fundamentals of it agrees that businesses can be a force for good. 

The declaration has 4 main ‘beliefs’: 

  1. That we must be the change we seek in the world. 
  1. That all businesses out to be conducted if people and place mattered. 
  1. That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all. 
  1. To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations 

How does remote work relate to BCorps? 

People think of remote work as ‘no longer going to the office’. But the impact of remote work goes well beyond the physical office space. 

Remote work is, by definition, location-independent. Meaning – you no longer have to be in a specific location to perform the job. It’s now ‘in the cloud.’ And as a result, anyone with an internet connection and the right skills can perform the job.  

And when I say anyone – I mean ANYONE AROUND THE WORLD. 

So how is that relevant to BCorps?  Let’s relate this back to the Declaration: 

Be the change we seek in the world: 

The world is full of amazing, talented people literally spread across EVERY country. Unfortunately, though opportunity isn’t. 

Often times – due to circumstances outside of their control – talented people are never given the chance to live out their dream job. Without moving, many times to another country, they have to settle for whatever jobs are in their town. 

Remote work changes this. 

By shifting work to the cloud, talented individuals now have infinite opportunities delivered to them. Cloud jobs enable them to apply their skills, from where they’re at, and get paid. 

By decoupling location and opportunity – the world is a better place for those that are willing to work hard & be the best.

Business ought to be conducted as if people and place mattered: 

People matter – place doesn’t.  

For many jobs today – people are forced to move from their hometowns, countries, family and loved ones to find high paying jobs. This has a negative impact on the individuals and families. It also causes ‘brain drain’ from the countries these talented people left. 

Instead, with remote, the cloud enables the jobs to be delivered to the people in their hometown. This has a profound impact on global society.

As these high-skill remote workers make more – they spend more at their local businesses, reinvest in the community, invest in their kids’ education, improve local infrastructure, etc etc. The velocity of money takes over in a positive (mostly) virtuous cycle. The impact to the local community is well beyond the remote worker themselves. 

Business should aspire to do no harm & benefit all: 

Throughout history, capitalism and technology have proven to be amazing forces to advance society. They have resulted in innovations that help cure diseases, software that enable the delivery of global education, and jobs that lift people out of poverty.   

Remote companies are on the ‘bleeding edge’ of truly making the world flatter and delivering opportunities to talented people everywhere. This innovation results in a higher standard of living in that society.  

High paying remote jobs help accelerate economic opportunity throughout the world. 

We are each dependent upon another and responsible for each other and future generations: 

Interdependency is the definition of a society. In a global remote world interconnected via the cloud, boundaries between states and countries are imaginary and irrelevant. 

Future generations will look at their careers & job prospects through a computer terminal. They will simply click on their dream job and apply. They will work in the cloud yet live local. They will help pay their parent’s medical needs, invest in local entrepreneurs and so much more 


There have always been corporations that focused on more than Milton Friedman’s profit definition. But the BCorp innovation is accelerating companies proactively looking at ‘shareholders’ in a much larger context. 

With the acceleration of remote work and cloud jobs – we will further expand the BCorp mission to include job creation around the world. 

The best tax code ever developed for small businesses

“Imagine owning stock in a company where the price appreciates greatly, you sell it, and pay NO tax on your profit.”  

This quote sounds like a late night informercial trying to sell you some get rich quick scheme. But would it surprise you that it’s the first line of an article written by the US Small Business Administration?  LINK 

What the SBA organization is referring to is ‘Qualified Small Business Stock’ or US Tax code 1202 – and it is the single best tax code for small businesses & small business investors. 


Section 1202 was actually enacted over 25 years ago as an incentive for taxpayers to start and invest in small businesses. But at the time of initial inception – the code had a graduated amount of gains you could exclude from your taxes – making it only marginally beneficial to taxpayers.  

But in 2010 – when the exclusion of gains went to 100% – the popularity of QSBS grew. And popularity skyrocketed when the capital gains rate went up in 2013.

This 100% exclusion was then made permanent by the Obama administration in the PATH Act in 2015. 

What are the benefits? 

In a nutshell – QSBS encourages investors to invest in small businesses under $50m in assets. After holding these qualified shares for 5 years – the gains from the shares are tax free (no capital gains, no AMT, no NIIT). 

The amount the taxpayer can exclude is the GREATER of $10m or 10x basis. Meaning – on a small business that shoots through the roof – the investor could theoretically book up to $450m in tax free gains. 


And for small business owners – the QSBS incentive adds several % to their IRR and encourages shareholders that have a long-term investment horizon. 

What do small business owners need to do? 

While the tax break is very generous – the definition to qualify has a bunch of restrictions: 

  • Must be a C Corp in the US  
  • Assets must be <$50m 
  • Must be an ‘active’ business (not a holding company) 
  • Must be in a business other than personal services, banking, insurance, financing, leasing, investing, farming, hotel/motel or restaurant 
  • Stock must be acquired in exchange for money, property or services 

Assuming your business qualifies – you do also have to consider the double taxation of a C Corp and ensure the QSBS tax exclusion is worth it. 

What do investors need to do? 

For investors – a few key elements need to be in place: 

  • Stock must be acquired by an individual (or a partnership) – but not a corporation 
  • Stock must be from the issuing company directly 
  • Stock must be held for at least 5 years 

Many times, however, the small business owner may not be aware of QSBS. So ensuring the owner is structured properly (C Corp, etc) is really important. Also – since dividends are not tax-free – you’ll need to determine if you want to receive them or if you simply want to keep that money in the business for the full 5 years. 

And if needed – there is also a ‘rollover’ clause (Section 1045) that enables you to move your QSBS gains under the 5-year mark into another QSBS within 60 days. 


If the idea of ‘tax free gains’ is interesting to you – QSBS is an incredible opportunity – and arguably the most generous tax code of all time for small businesses & small business investors.  

But ironically – QSBS is still largely unknown by most small businesses and investors.  

The good news is that there are a lot of articles out there to spin up. But ensure you speak to your tax attorney to get all the details that are applicable to your situation.  Here are some good articles/papers: 

*Note – Ionic Partners does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. 

Has your company growth stalled? You may be in the 2nd Chasm.

2nd Chasm

You remember it like yesterday. Your company’s revenue had flatlined. Growth had stalled. Things that worked before just stopped. You were desperate.

Geoffrey Moore states that your company fell into ‘The Chasm’. In his iconic 1991 book ‘Crossing the Chasm’, he describes how the ‘smooth’ Technology Adoption Curve is a bit misleading.

The Technology Adoption Curve

technology adoption curve and company growth stalled as exit early majority

All companies & technologies ride the Rogers Technology Adoption curve. The curve describes the adoption of technology across different market segments. Some customers are willing to be on the ‘bleeding edge’ and others will only adopt a proven technology. This Technology Adoption Curve is broken up into 5 market segments. 

  1. Innovators – the first to adopt new technologies, they are a small but passionate set of leading-edge folks that love tech advancement. 
  2. Early Adopters – the second group is a slightly larger group that is also generally risk-oriented and highly adaptable to new tech. They embrace new products after the Innovators.
  3. Early Majority – the third group is a much larger group that is a bit more careful than the previous 2 groups. They are still willing to adopt new technologies – but only after the Early Adopter and Innovators have proven the technology to be effective.
  4. Late Majority – the fourth group is a conservative and risk-adverse group.  They need a bit of convincing before investing in something new.
  5. Laggards – the last group is an extremely frugal, very conservative and technology-averse. These folks still have rotary dial telephones.

The Chasm

Moore states that there is a ‘chasm’ between the Early Adopters and the Early Majority. This is due to the fact that the expectations of the first 2 groups are very different than the last 3.

crossing the chasm chart and growth stalled though in majority

To effectively ‘Cross the Chasm’ – companies need to ‘pivot’ their product offerings to address the mainstream market. A ‘whole product’ is required for a technology to cross the chasm into the mainstream of the market.

For those companies that do manage to get across the chasm – good days are typically in the cards. The company is now into the ‘Early Majority’ – which is a much larger part of the market. Often times, the company will double or triple in revenue with strong year-on-year growth.


But what happens after that?

When you relook at the Technology Adoption Curve – and zoom at the top of the curve – you notice something interesting. As you climb up the Early Majority, the slope of the curve starts to decline. It then eventually becomes flat! 

growth stalled at top of technology adoption curve

In business terms – this means the awesome revenue growth that you experienced after crossing the chasm starts to slow. It then completely stalls. This stall comes out of nowhere – since you’ve been experiencing great growth over the past several years. And as time goes on, unfortunately, revenue then starts to shrink.

According to ScaleVP – you can predict this growth decay. After analyzing thousands of SaaS companies – the ‘predictable decay’ of next year’s growth will be 85% of this year’s growth.  And for many software companies – growth under 20% per year results in only an 8% chance of surviving a few more years (SaaS sales benchmark)

Predictable revenue decay chart and growth stall at 85% of last year

But I thought this was supposed to be the good ole’ times?  You worked hard to cross Geoffrey Moore’s chasm – what’s going on here???

The 2nd Chasm

What’s happening here is actually an important missing part of Moore’s theory.

Believe it or not – there are actually 2 chasms!

Wait – what?

The first chasm gets startups to the mainstream market. For many software companies – revenues go from $0 to $3-5m a year. Getting to millions a year in revenue is incredibly challenging.

But as predicted by the adoption curve and predictable decay – revenue growth gets harder and harder every year. Deals that appear to be ‘just around the corner’ delay further.

The technical debt on your product expands while your next generation product just can’t seem to launch.

Your investor’s IPO dreams are being crushed. Your employees are starting to wonder if this rocket ship isn’t going to pay for their future yacht after all.

You’re now in the 2nd Chasm.

By definition – the 2nd Chasm is a bit further in a company’s life. Revenues have often grown to $8-$10m/year – but have been hovering at that level for several years.

And similar to the first chasm, companies require significant changes to get across this new chasm to regain growth. 

But unfortunately – this 2nd Chasm is much much harder to exit than the previous.

Why is it harder to cross the 2nd Chasm?

Companies that fall into the 2nd Chasm have often been in business for 8-10 years. They’ve done a great job getting across the first chasm and addressing a portion of the mainstream market. But crossing the 2nd Chasm is harder than the first due 3 primary reasons:

  1. Company processes are more established and rigid: Think of these companies as middle aged. Not quite as nimble or flexible as they were when they were a few years old. And as a result, the process and procedures that have been in place for a decade are now incredibly hard to change.
  2. Product development has been going on for years: You’d think that the more ‘mature’ product would be better equipped to handle change. But more often than not – since the product was originally built 8-10 years ago – it’s on a legacy tech stack that isn’t easy to change. Many of the original architects are now gone. The product has a ton of technical debt that was never worked off. The product also contains countless small features that have been incrementally added on over the years. All of this makes the product rigid and difficult to modify.
  3. Sources of funding have dried up: Young, sexy, fast growing companies have access to a variety of new funding avenues (VC, angels, etc). Mature companies, unfortunately, don’t have the same options. As a result, any ‘pivot’ has to be self-funded and incremental. This makes the major business & product shifts needed to cross the 2nd Chasm a significant challenge.

And due to all of this, unfortunately, many of these slow growth 2nd Chasm companies end up limping along with shrinking revenue – sometimes for another decade. Eventually, the company is displaced by a fast, hot new competitor on a modern tech stack.

There are thousands of ‘stuck’ software companies in the 2nd Chasm today…

Hot, sexy new competitor problem (oh, and they’re rich)

The good news for 2nd Chasm companies is that your aging customer base is generally satisfied. The product does what it originally intended to do. The company has gone through almost a decade of renewals with your customers and the users are generally content.

The bad news is that a bunch of VCs overfunded a set of new sexy startups in your space. These startups are attacking your customers with fancy words like ‘Artificial Intelligence’ and ‘Machine Learning’. And these VCs didn’t just fund them with a few nickels – they gave them hundreds of millions to come take your happy stagnating customers.

VC funding worldwide and rapid growth of investments

Initially – your problem isn’t your current customers. Your problem is that you stop winning ANY new customers. They are all choosing the hot new fully featured competitor.

You first assume it’s a sales manager problem – so you churn through 2-3 new VPs of Sales with no success.

You then invest in either a marketing agency or a VP of marketing that promises to sprinkle magic fairy dust SEO on your website. They use fancy words like LTV/CAC and guarantee they will bring you new customers if you invest in just a few more Google Ads.

And to pay for all this additional sales & marketing – you cut your product & dev team. You may even completely outsource the engineering to a $2/hr 3rd world body shop. 

All of this, of course, fails.

Meanwhile you are now even shorter on money.

And during this time – your ‘loyal’ customers all have one eye open to switching. If the product wasn’t deeply embedded into their business processes and pain to get rid of – they would have switched a while back. 

But it’s only a matter of time until you see these loyal customers slowly jump ship. The speed of innovation of the sexy competitor on the new tech stack is exponentially faster than yours. And as soon as the sexy competitor has a full-featured product suite and make it painless for your customers to switch (both technically & via pricing) – you start losing customers.


Your spot product is not longer competitive. You are now in a death spiral.

What can be done for 2nd Chasm companies?

2nd Chasm companies have 3 options:

  1. Accept the decline in business – and shrink until revenue goes to zero
  2. Spend all your money pivoting & overhaul the product/company 
  3. Merge with other 2nd Chasm companies to get across together

The first 2 options are the most common.

Option 1 is often chosen by aging entrepreneurs that are basically cruising until retirement. They are fine riding out the end of life of their company. Though not sexy – these companies can slowly decline for another 5-8 years until their final customer cancels. If the entrepreneur manages costs – they can maintain their modest salary. The company becomes a lifestyle business.

Option 2 is much more common since many of the companies at $8-$10m in revenue raised some money along the way. If they are a VC-backed firm – the VC firm is likely nearing the end of the fund life and looking to maximize cash. If it was largely angel funded – the angel has written off that investment or simply looking to get back their original $s. The company spends every last dime trying a hail mary to grow. And when it fails – they shutdown the company (or do a deeply discounted asset sale).

Option 3 is not used as often (but should be). As mentioned, most 2nd Chasm companies are good companies that have achieved partial product market fit. But most of them simply can’t afford to revamp their product to achieve true full product market fit. But by joining forces with 2-3 other firms that service the same customer base – they can scale up to $30m in revenue – and can now afford the right level of product management, engineering and other investments to jump across the chasm.

The merger option also forces each of the companies to rethink their long-standing processes and procedures. Often times, ‘best known methods’ are consolidated to make the combined company stronger. Additionally, the merged company can choose the best talent from within each of the companies to serve as the new leadership.

Their combined offering to the customer base drives up retention and gives a fighting chance to compete against the sexy new competitor.

Not easy – but higher likelihood of success than the first 2…

Platform for 2nd Chasm companies?

At Ionic Partners – we believe there is a great future of many of these 2nd Chasm companies. We are building out a horizontal platform where ‘sets’ of 2nd Chasm companies can be successfully merged together. By reducing the frictions to bring together these companies – we can jump across the 2nd Chasm together and unleash a new wave of entrepreneurship and innovation.

If you are a CEO in the 2nd Chasm – let us setup a virtual coffee to discuss options to merge with other similar firms in your space. There are thousands of other companies in a similar situation – and it’s by joining forces that we are all stronger.

It’s never easy to get out of a chasm – but with a few additional hands & additional scale – we can build bridges together.