Inside Empath's $2M Raise: Wes Spencer Discusses Community Investment for MSP Growth

Business of Tech: Daily 10-Minute IT Services Insights

Wes Spencer, co-founder of Empath, a training and education platform for managed service providers (MSPs), discusses a unique funding model that diverges from traditional venture capital. Instead of seeking investment from typical VCs, Empath successfully raised $2 million from industry insiders, primarily MSPs themselves. This approach fosters alignment and advocacy among investors, who are also customers, but it raises important questions about scalability and governance. The conversation delves into the implications of having investors who are directly involved in the product's development and direction.

The investment structure utilized by Empath is based on Y Combinator's SAFE notes, which allow for a straightforward and fair investment process without changing control of the company. Spencer explains the importance of ensuring that investors are qualified, adhering to SEC regulations to protect non-professional investors. This structure not only simplifies the investment process but also limits the amount each investor can contribute, ensuring a diverse group of stakeholders who are genuinely invested in the company's mission.

Spencer highlights the demographics of their investors, primarily consisting of CEOs from established MSPs with significant revenue. These investors are motivated by a desire to influence the vendor ecosystem positively and to have a say in the direction of the platform they use. The governance model established by Empath ensures that while these investors have a voice, they do not have control over the company's day-to-day operations, allowing for a balance between investor input and the leadership team's vision.

As Empath continues to grow, Spencer acknowledges the potential need for future funding rounds, including the possibility of engaging with venture capitalists. He emphasizes the importance of maintaining transparency with investors and being responsible stewards of their contributions. The conversation concludes with Spencer expressing confidence in the company's trajectory, aiming for sustainable growth while remaining committed to the community-driven approach that defines Empath.

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