Invest1 publisher2 min readPublished
Rewind sells majority control to H.I.G. so its early venture funds can cash out
H.I.G. Growth Partners took majority control of Rewind after the Ottawa backup firm spent nearly a year looking for a way to let its early investors cash out. For the venture funds it is a partial exit, and what they kept is a minority bet on how far H.I.G. can grow the company.
The Investor · Invest desk
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What happened
- Rewind had raised more than C$100 million by late 2021 from Insight Partners, Inovia Capital and seed lead ScaleUp Ventures.
- With 11 years in business and 25,000 customers, Potter said the funds pressing for a deal had been invested in Rewind for a long time.
- Other companies were interested in buying Rewind, and Potter said he considered potential acquisitions and other deals before choosing H.I.G.
- Potter and co-founder James Ciesielski remain the largest shareholders after H.I.G., and Inovia and Insight kept part of their stakes.
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Why it matters
- exposure The founders and the venture holders who stayed in now share less than half of Rewind, so H.I.G. decides when and at what price their second payout comes.
- capability H.I.G.'s backing gives Rewind money to buy its way into SaaS resiliency and monitoring, two products its customers have asked about.
- constraint Outsiders cannot compare H.I.G.'s price with the more than C$4,000 of venture money raised per customer, so other Canadian SaaS sellers cannot use this deal to set an asking price.
- precedent Founders whose funds need to exit now have a worked example: sell majority control to private equity and keep running the company, in place of selling it whole to a strategic buyer.
A majority means more than half. That leaves the founders, Inovia, Insight and every other holder sharing less than 50% of Rewind [1]. Their remaining stakes pay out when H.I.G. decides to sell, at a price H.I.G. negotiates [1].
Potter described the pressure plainly. "Naturally, funds come to a point where they need to exit the positions that they've had, and that was kind of what we were running into with everybody," he said [7]. He gave this reason for choosing H.I.G.: "We felt like this was the best balance between executing what our investors were asking for, but also giving us some potential to continue gaining on the upside as the business continues to grow" [4].
Potter weighed acquisitions [3], and according to BetaKit the H.I.G. offer won because it let him stay with the company [12]. So the nearly year-long search [2] ended on terms the founders shaped as well as the funds, not on whatever offer happened to be left.
Potter did not disclose what H.I.G. paid [8]. Spread more than C$100 million of venture money across 25,000 customers and you get more than C$4,000 per customer [2]. Whether Insight and Inovia came out ahead depends on how H.I.G.'s price per customer compares with that.
The stakes the funds kept can grow in two ways. One is acquisitions. Potter said the new backers free Rewind to buy companies, possibly taking it beyond backup into SaaS resiliency or proactive system monitoring [11]. The other is organic growth, mainly from developers, who are on track to pass e-commerce as Rewind's largest customer segment this year [9]. Potter said Rewind has seen AI make unintended changes to SaaS data that customers want to roll back [10]. Part of that developer demand comes from Atlassian forcing its customers onto its Cloud product [9]. Once those customers finish moving, that source of developer sign-ups goes away.
I think this is a liquidity deal the founders built around keeping their jobs, and two funds took a partial exit to get it. The case against that view is that the interest from other companies [12] never turned into a firm bid. In that case H.I.G. was the only buyer with cash, and the deal was a fallback for funds that had to sell. Either way, Rewind remains a standalone company with an owner willing to pay for acquisitions [11]. A single Ottawa company's sale does not show that private equity has become the usual exit for Canadian SaaS companies. That would take more Canadian deals on the same terms.
What to watch
- Rewind's first acquisition under H.I.G., and whether it adds a new backup area or moves into the resiliency and monitoring products customers have asked about.
- Any disclosure of the deal's value, or of how much of their stakes Inovia and Insight sold.
- Another Canadian venture-backed SaaS company selling majority control to private equity after a sale search; a second case would start to make this a pattern.