Scaleworks Startup Mailgun Announces Exit with Private Equity Firm Thoma Bravo

By Iris Gonzalez
A hallway inside Scaleworks. Courtesy image.

Mailgun Technologies, Inc., a provider of email infrastructure software, announced Monday it sold a majority stake in the company to private equity firm Thoma Bravo, a leading software-focused private equity investment firm. The transaction closed on March 26, as reported by Thoma Bravo financial advisor William Blair.

Mailgun is a leading email automation platform provider for software developers and was one of eight startups in Scaleworks‘ portfolio. The San Antonio firm is a  hybrid venture capital and private equity fund that uses its capital to help grow the business-to-business technology startups it acquires. It was co-founded by former Rackspace executive Lew Moorman and investor Ed Byrne.

The companies did not share terms, but this is the second owner for Mailgun. The company was founded in 2010 and was a part of the Y Combinator winter 2011 cohort. Rackspace first acquired the San Francisco-area technology startup in 2012. Five years later, Mailgun spun out of Rackspace with a $50 million investment led by San Francisco-based tech private equity fund Turn/River Capital that included a minority stake from Scaleworks and Rackspace. After Monday’s deal, Turn/River will maintain a minority ownership stake in Mailgun.

In a blog post announcing the investment, chief executive (CEO) William Conway said the investment should help the company expand its capabilities and accelerate its product roadmap.

“Thoma Bravo has a proven track record of helping software companies achieve exceptional results with over $30 billion in assets under management and relevant past and present investments in companies like SolarWinds, SailPoint, and Blue Point Systems,” Conway wrote. “Mailgun’s partnership with Thoma Bravo gives us the capital and operational expertise needed to continue growing our company, expanding our product suite, and building upon a truly comprehensive developer-focused offering.”

Mailgun typically competes with companies like MailChimp and SendGrid. Thoma Bravo has a history buying enterprise software companies.

“Thoma Bravo believes there is tremendous growth potential in the email infrastructure market,” wrote Hudson Smith, a partner at Thoma Bravo. “Will, Josh, and the entire Mailgun team have built the leading product in the space with their developer-centric approach, and we are looking forward to a strong and productive partnership with them.”

Scaleworks raised $60 million over two years for its first fund, which was spent by the end of 2017, according to U.S. Securities and Exchange Commission records. The San Antonio fund announced in February it had raised $80 million from investors in its second funding round. Scaleworks acquired eight startups for its portfolio. The successful exit for Mailgun makes it the third company to leave Scaleworks’ portfolio.

The first was FollowUp which sold to a private equity firm in Miami in June 2018. The software as a service company Assembla then sold in November 2018 for an undisclosed price to Houston-based Idera, a company that owns various business-to-business, developer-focused software companies. Chargify, Earth Class Mail, Filestack, Keen, Qualaroo remain in its portfolio.

Mailgun’s workforce has quadrupled in size since spinning out from Rackspace two years ago, according to its company blog post. Leading development teams such as Slack, GitHub, Stripe, Lyft, OfferUp, Zapier, and Cinemark seamlessly integrate their products with Mailgun to power their email.

“The company was growing well within Rackspace, but we believed the opportunity to create its own story and position as an independent company was very strong,” Byrne said. “This is a significant validation of the growing tech ecosystem here. Mid-market companies drive a lot of growth and enable senior executives to try more entrepreneurial things (versus big companies). We hope to see Mailgun continue growing in San Antonio for many years to come.”

Active Capital founder and CEO Pat Matthews led the deal to bring Mailgun into Rackspace in 2012, finding the company when they were bringing in less than a million dollars in annual revenue. He has watched how the startup has continued to grow and gain market share as it has changed hands.

“Mailgun is an amazing business,” Matthews said. “This business likely still has its best days ahead.”

News of Mailgun’s exit spread rapidly as startups shared the news across San Antonio’s entrepreneurial community.

“I think this is a huge investment and validation for San Antonio,” Scaleworks co-founder Moorman said. “Continued investment and growth will lead to a big future and leadership position in a great category for Mailgun.”

Featured image is of a hallway inside Scaleworks. Courtesy image.

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