Case study: Zitcom
In 2015 HgCapital invested in Zitcom and ScanNet, two leading Danish hosting and cloud solutions providers. The investment was made from HgCapital’s Mercury Fund, which focuses on growth buyouts in the technology sector across Europe. Clearwater International acted as exclusive financial advisors to Zitcom on the sale.
Zitcom, which operates under the Wannafind, UnoEuro, Curanet and Zitcom brands, has built up a highly differentiated hosting business addressing attractive growth segments of the cloud solutions market. Today it provides cloud services to more than 100,000 business and private customers, while ScanNet has a further 13,000 customers.
Like so many hosting companies today, Zitcom’s roots are in the dotcom era at the turn of the millennium. As co-founder and CEO Stefan Rosenlund explains: “A group of us first got together while still at school and the business started life in a basement. Our original plan was to launch an online search engine so we went out and bought some servers and an internet connection. But we then realised that there was some interesting stuff going on in the hosting industry so we changed our approach.
“I would love to say that we had a fantastic business plan, but to be honest this started out as a hobby. Looking back today there were two key things that made it all possible for us. Firstly, it was the relaxing of rules around the release of domain names. And secondly, it was the fact that we arrived just after the dotcom bubble happened. That meant funding was out of the question for us so we had to build the company from the bottom up.”
Zitcom would go on to build up a subscription revenue business with a mix of consumers and small businesses as customers. “We just loved what we were doing and still do to this day. That is our DNA. We are very passionate about what we do and passionate about what we offer our customers.”
Today the business is split between mass hosting and managed hosting divisions. Rosenlund puts the success of the business down to this personal approach. “We are fanatical about how we treat our customers and I think our success goes back to how we started. I have been right at the sharp end of the business from the very start, picking up phones to customers. I know exactly how the platforms are built, how the products are built. I have been involved in all aspects and functions of the company and that is crucial for a CEO in our industry.”
Another key to success has been keeping up with the customer. “Today customers no longer accept manual processes. They want to be able to switch products themselves, do things online. This move towards selfcare will become a must in the industry.”
Rosenlund says the evolution of hosting has also helped the company evolve. “It has meant that we have created more managed products and that has helped us increase our pool and create more sticky relationships with customers. Providing that local presence is key too.”
It is for this reason that he doesn’t believe that the rise of the ‘mega-cloud’ players will kill off specific country providers. “Over the next five to 10 years we will still have country specific providers, but within countries I do see more consolidation as the costs associated with running hosting businesses continue to increase. Personally, I think the mega clouds will always need local partners to do local customer service and play that local adviser role."
Rosenlund says Private Equity groups (PEGs) started looking closely at possibilities in the Danish market when TDC Hosting was put up for sale in early 2015.
“PEGs began looking at the market and realised there were a number of smaller players which were growing nicely and they saw the opportunities for a buy-and-build. That is precisely what happened to us and we are now part of HgCapital’s strategy which I find very attractive. We will grow both organically and through acquisitions.”
Will that strategy extend beyond Denmark? Adds Rosenlund: “Hg see Denmark as part of the Nordic region, so it would be obvious for us to look at expansion across the Nordics, especially as Visma - another HgCapital investment - is one of the largest Norwegian players. But right now we are focused 100% on Denmark and there is much to do here.”
He adds that the biggest challenge for the business will be to keep a local presence and maintain its agility. “It’s all about keeping a very close eye on all your competitors, wherever they may come from.”