This story starts on a Manhattan rooftop at the end of this past summer…
This is a Sponsored Feature from Electric. I only write Sponsored Features where I have a genuine personal connection to the story and where there are real lessons for founders, funders, and operators. You can read our Sponsored Feature editorial guidelines here. –John
This story starts on a Manhattan rooftop at the end of this past summer. I met the founder of Electric, Ryan Denehy. Electric was a company I’d tracked for years, as did most folks who were in the NYC startup scene pre-COVID. They had marquee investors, were growing extremely quickly, and were solving a problem I knew firsthand—IT for small businesses. Things like software installs, new computer setups, and password resets. Only Electric was injecting software, AI, and chatbots into an industry that historically relied on armies of tech support people and little else.
Over drinks, Ryan said they were coming off a big pivot and asked if we’d be interested in interviewing him and hearing the inside story. What I came to find out is that yes, there was a pivot. But it’s not as simple as that. It’s a startup story that echoes a boom-to-bust-and-back-to-boom story that I had lived through personally over 20 years earlier.
Let’s dive in.
DevOps Detour
I cut my teeth in tech, working in IT/DevOps. First, a high school summer at an Atlanta ISP, followed by a tech support gig one town over from me. After that, IT work-study at UPenn. And soon after graduation, led the IT ops team at FoxSports.com. Along the way, I watched some of the vendors we used have massive exits. And I even crossed paths with Loudcloud, the pre-cloud cloud startup Marc Andreessen, and Ben Horowitz started. After hearing this, you probably won’t be shocked to hear that this was also around the time I became personally interested in venture capital.
The Shy Kid Who Built A Sales Machine
Back to Ryan … he’s started three companies, sold two in profitable exits for his investors, and raised over $200MM in venture capital across all three. So you might be surprised by one of the first things he shared in our interview.
“For the vast majority of my childhood, I was incredibly shy, very socially awkward.” He grew up in Connecticut. As he said, “not exactly extreme sports country,” but somehow found himself making mountain biking DVDs as a teenager. To fund these videos, he had to cold-call companies for sponsorships.
Ryan described that split reality: “I could be so painfully shy at school all day in high school and have like no ability to talk to another human in a compelling or competent way. And then the second I got home and I had to just start hammering away at this list (of companies), all that went out the window.”
He didn’t realize the cold calling wasn’t just breaking him out of his shell—it was the rehearsal for the high-volume outreach that would power Electric’s early growth. And it would ingrain in him the idea that a bigger pipeline (of candidates, of sales leads, of investors) can solve almost any problem that a startup might face.
Burning The Boats
But there are still startup problems that can’t be solved by pipeline. As Ryan told me, “All three of my companies had to go through some pretty big pivots at some point in their life cycle.” Take his first company.
- Website launched to sell extreme sports videos.
- Spent months trying to get people to buy the videos.
- Nobody did.
With six months of cash left in the bank, his cofounder called him into his office and said: “It’s time to burn the ships. This is a road to nowhere.”
Fortunately, his cofounder had an idea of what to do instead. There were hundreds of extreme sports websites with great content and audiences, but none big enough to talk to national advertisers. They’d already built content distribution and ad-serving technology. Advertisers kept telling them: “Bring us an audience and we’ll spend money with you.”
The new plan: divide and conquer. Ryan’s co-founder would spend three months meeting every ad agency. Ryan would hit every extreme sports trade show and sign up websites for their ad network. Build the network while pitching the advertisers. It ended up working out, with the company eventually being acquired by USA TODAY and with the investors making money on the deal. Ryan went on to start and sell (to Groupon) a second company, Swarm Mobile, a few years after that.
The Third Act
Like most serial founders, the pain points Ryan experienced in his prior companies planted the seeds for what to build next. In his first two companies, he’d had the exact same painful experience: working with outsourced IT support companies that treated small businesses like garbage. Slow response times. Calls that went unanswered.
If you were a business that needed IT support, you (like Ryan at his previous companies) either already hated whoever you were working with or were trying to DIY it and realized it was terrible. So, like a lot of founders do when they see a painful problem over and over and over again, they get to work on finding solutions. “I scoured the earth and I just didn’t find anybody who I thought was doing anything all that special,” Ryan said.
He spent two months talking to the folks who handled IT at small companies. Every conversation validated the same pain point. Soon after, Ryan raised a $2MM seed round led by Bowery Capital, and hired his first support technician and first customer success person. Electric was born. They launched an “embarrassingly minimal” MVP in 6 weeks. Within the first 90 days, Electric went from zero to 200 workstations managed.
Like most founders who launch a new company, the first 20-30 customers came from his personal network and Electric’s investors. And there was a strong market pull. “I didn’t have to push anybody into using us,” he explained. “It was basically, ‘Hey, this is what I’m doing. I think we can solve this problem. Would you like to be a customer?'”
Getting Electric to $1M (And Quickly, to $55M) ARR
Electric’s team sent 275,000 emails and made 10,000 phone calls in the first year, which got them to their first $1M in ARR. By that point, the team had grown to 20-25 people, mostly split between sales and service technicians.
By mid-2020, they were already booking successive $1M ARR months. By 2021, Electric had grown to 400+ employees and revenue had more than doubled over the previous year, growing from $17 million in 2020 to $38 million. They also acquired two competitors along the way. With that kind of revenue growth, Electric was looking like a best-in-class “triple, triple, double, double, double” company with the potential to generate exceptional returns for its investors. As Ryan told me in our interview:
“At every inflection point, we said we have a go-to-market motion that’s working. Margins are improving, retention is improving, all the metrics are going in the right direction.”
“So if we can raise capital on good terms, keep the growth going, invest in the product—this could be an enormous business.”
However, by the end of 2022, growth had slowed and Electric finished the year with over $50M in ARR (~30% growth, but below their target of $70M). That year, the company hit unicorn status via their $20M Series D-1 round that was led by Harmonic Growth Partners. And over the life of the company, Electric had raised over $200 million in total from firms like Bessemer Venture Partners, GGV Capital, Primary Venture Partners, Bowery Capital, and Greenspring Associates.
The Callback
Remember I mentioned that company that Marc Andreesen and Ben Horowitz started during the Internet bubble, Loudcloud? Here’s what happened to them soon after they crested the $50M revenue mark. The stock market seized up, they did a Hail Mary by selling their cloud services business to EDS, and relaunched as a software company called Opsware.
Electric wrapped 2022 at a similar place to where Loudcloud ended its pre-pivot run in terms of revenue. In both cases, strong macro headwinds hit them head on. With the days of ZIRP winding down and the cost of capital increasing, Electric’s full-service IT help desk business model became a huge liability.
“The war in Ukraine, rising interest rates…everybody acknowledged the high cash burn, capital-intensive model, the dollars were not going to be there for that,” Ryan said.
Ryan knew that they would need to course correct–but that cost-cutting wasn’t a strategy by itself. As he told us: “Cost cutting can buy you time, but it’s not going to buy you a better business.”
There Is Always A Move
Ryan had been quoted as early as 2020 saying that Electric would likely eventually become a software business. The post-ZIRP macroeconomic environment looked like the jolt that would speed up that process, with the investor community losing appetite for capital-intensive businesses like Electric’s was at the time.
But there was something else. Ryan and his team had been witnessing a demographic shift over the years within their customer base over the last couple of years. They were digital natives who didn’t need a traditional help desk in the classic sense, which is what Electric had been offering as their core product for years. Instead, they were “begging for a highly automated, streamlined, pure SaaS” AI-based solution.
So Ryan took Electric down a road that was similar to the road that Marc Andreesen and Ben Horowitz went down with Loudcloud over 20 years ago. “We put (the services business) on its own P&L for a year and a half, separated all the systems…(which was) not for the faint of heart,” Ryan said. In the meantime, Electric’s engineering team began rewriting the Electric software stack from the ground up to support the new delivery model.
But it wasn’t just the tech stack that needed to change. They’d also need to reevaluate their go-to-market model. To pull the pivot off, Ryan believed they’d need to move from a direct sales model to one that was wholly reliant on reseller channel partnerships. From his past experience building Swarm Mobile, he knew that a channel-based model could work well if executed properly.
There Is Always A Move
By summer 2024 (about a year into shifting to the reseller model) Electric was working with an initial set of partners that looked promising. Ryan described it as a potential “gusher of revenue” because a single reseller partner could bring them hundreds or even thousands of customers on Day 1 of that partnership.
Of course, it’s never that easy. “For reasons that were totally outside of our control, we just misjudged the market,” Ryan explained. Those initial partner targets didn’t pan out.
Unfortunately, the channel challenges weren’t happening in isolation. At the same time, Electric was experiencing internal execution problems, and Ryan had to replace key people on the team. These two crises converged in summer 2024, creating what Ryan describes as one of his toughest moments in building Electric:
“I thought … we’ve been at this for a while. I’ve been given a lot of latitude by the board to go figure this out. And like, we got a goose egg.”
“It was the first time in many years where I felt like I didn’t have a great answer, and I didn’t have a quick fix, and it was unclear where we were going to go,” Ryan admitted.
But just as ZIRP and the war in Ukraine caused macroeconomic shocks that Electric couldn’t avoid, this time a technological shock appeared that Electric was perfectly positioned to capitalize on. The rise of ChatGPT and foundation models over the preceding years made AI feel omnipresent, and investors became convinced the technology would unlock huge efficiencies across sectors.
That belief fueled a wave of consolidation, with roughly 20+ private equity–backed (and increasingly venture-backed) rollups aggressively buying IT providers, betting AI would enable large, high‑margin IT service platforms that weren’t feasible in the “Before AI” era. The resulting competition among PE and VC suitors for a shrinking pool of targets pushed IT provider valuations higher.
It made for a perfect storm that Ryan and the Electric team could capitalize on. It was then that Ryan revealed to me something he hadn’t talked about publicly until our conversation:
“(In April 2025) we were able to spin off and sell the legacy services business for multiple tens of millions of proceeds, all cash.”
Those new owners bought all the employees and all the customers. And with it, all of the revenue.
The clock was ticking for the new Electric.
“Either you die, or something amazing happens.”
In the second half of 2024 and throughout the start of 2025, Electric had begun hearing from payroll providers. Those payroll providers had been aware of Electric’s IT management capabilities and wanted to put it in front of their customers, many of whom were small-to-medium sized businesses. Both to deliver a better experience to their customers and to generate additional revenue.
The idea of combining these features isn’t a new idea. Deel and Rippling are two companies that popularized the bundling of benefits, payroll, and IT management into a single product. But as Ryan put it, “99% of businesses don’t work with those two companies (Deel and Rippling) and probably never will. It’s an enormous market.”
It’s early days, but companies like Justworks, ADP, Trinet, and Paychex have already launched integrations with Electric to their customers. They’re also getting inbound interest from internet service and broadband providers. As Ryan put it: “It’s kind of a layup if you’re an internet service provider to say, ‘Hey, we have our broadband plus package that includes IT support powered by Electric.’” A few partners at that scale could put Electric in front of millions of SMBs.
(Electric’s Integration with Justworks)
Will It Work?
With the sale of the services business, Electric bought time to secure additional channel partnerships and deepen the ones they’ve already established with payroll providers like Justworks, Paychex, and ADP. Early signs show that the new business model may be working. Ryan shared that during one 90-day stretch last year, they added roughly 500 customers and 11,000 users, which he contrasted with the fact that it took them three years to get their first 500 customers and 10,000 users in the old direct-to-customer sales model. And he forecasts that Electric should hit cash flow positive in the first half of 2026.
There’s also an upside case that draws from the history lesson about Loudcloud that I shared earlier. Five years after selling off their cloud business, Opsware (fka Loudcloud) was acquired by HP for $1.65B in cash. If Electric’s SaaS platform becomes a default IT management SaaS inside enough payroll and connectivity bundles over the next 5 years, an Opsware-style outcome could potentially become viable. That’s if Electric can grow fast enough to get to cashflow breakeven before tapping out the proceeds of the managed services sale.
There’s always a move, and Electric made theirs. In a year (or two, or five), we’ll know if it bought them a soft landing, or a buyer who acquires them at a premium.
Either way, it bought time. And a shot at something bigger. I’m looking forward to seeing how the story ends. I’ll keep you posted, too.
Sources
- Our 1 hour interview with Ryan and subsequent emails with him
- https://bowerycap.com/blog/insights/founders-who-fundraise-ryan-denehy-electric-ai
- https://techcrunch.com/2022/03/29/electric-it-infrastructure-software-fundraise-1-billion/
- https://www.thespl.it/p/after-selling-two-startups-ryan-denehys
- https://bowerycap.com/blog/insights/the-first-million-ryan-denehy-of-electric
- https://www.channele2e.com/news/electric-ceo-ryan-denehy-interview
