It’s rare and welcome news in Philly software when a local firm that everyone watched grow up sells for well over a billion dollars.
iPipeline, the Exton insurance-automation firm picked up by the Florida tech holding company Roper Technologies for $1.63 billion on Aug. 8, showcases a series of made-in-Philly features, including:
- A founder from the old-school insurance industry -- in this case, Chester County life-insurance agent Bill Atlee, who was frustrated by all the paperwork in life-insurance applications and imagined a better way.
- A seasoned CEO to grow with -- Tim Wallace, an Indiana University of Pennsylvania-trained accountant who over a long career showed a knack for turning small tech operations into businesses big enough to attract buyers such as Xerox, and boosted iPipeline sales to $200 million this year, from $5 million in 2008.
- A far-seeing investor -- Mike DiPiano, of NewSpring Capital, Radnor, one of the handful of Philly-area investment firms to raise and profitably invest more than $1 billion to grow small firms and sell them at a profit over the last 20 years.
All that’s lacking was an IPO, which could have listed iPipeline in the global stock markets and boosted its headquarters staff in Chester County beyond the current 275 people. Instead, iPipeline will be the latest of dozens of independent businesses operated by Florida-based Roper. But we can’t have everything, as Philly’s tech pioneers have demonstrated more than once.
The sale price is about eight times iPipeline’s expected sales for next year, four times what Chicago-based Thoma Bravo paid for iPipeline just four years ago -- and 20 times profits, up from 17 times in the earlier deal.
An attractive price: “This is the most robust and frothy market for software and tech companies that I’ve seen in my lifetime,” said Wallace, 62.
The higher multiple is a sign of how much iPipeline’s clients -- big insurance carriers -- now use iPipeline systems to replace the old form-filled process for buying life policies and annuity investments. The company says insurers save more than $2 million on every 10,000 apps using its iGO electronic applications -- around $200 per application that used to go to printers, clerks, and storage suppliers, now split between lower costs and higher profits.
How’d this happen -- and why here?
For most of the industry’s history, Wallace recounts, when an agent priced policies or annuities for a customer, “you would have to go to all the insurance carriers and ask for each one’s quote and compare.”
Atlee’s idea was to combine company quote feeds onto a single computer platform for easy reference. Atlee set up LifePipe, a service that, Wallace says, has grown to collect two-thirds of U.S. insurance quotes and package them for easy comparison by agents using more than 1,300 insurance marketing and distribution firms, vastly simplifying price and term comparisons.
The service proved popular and profitable. But customers’ next step -- applying for a policy or buying a life insurance-based annuity -- remained a ponderous paper-based process. In the mid-2000s, leaders of the nascent operation, dubbed Internet Pipeline with about 30 employees, began thinking about how they could automate applications, too.
They would need money, for software developers and marketing. CEO Larry Berran, then 35, pitched Mike DiPiano at NewSpring, which invests in a wide range of small firms across the eastern United States. To check it out, DiPiano recruited Wallace, a former Arthur Andersen consulting boss who had run and sold tech businesses and then headed Chesterbrook-based FullTilt Solutions, an e-commerce software developer.
"Mike said, ‘I want you to take a look at this company in your back yard. I don’t know what to do about them. One day I want to put money in. One day I don’t,’ ” Wallace recalled.
So Wallace met with Berran and went over the business and the vision. Then he called all the insurance agents and carriers he knew and grilled them about the applications process and the confusion of paper and computer systems across the industry. Finally he called DiPiano back with his conclusion: “This is the opportunity of a lifetime.”
Life insurance, he told DiPiano, is “a fragmented industry.” Most of its software had been developed piecemeal, as with LifePipe, “by people in the industry who were frustrated” that the big Silicon Valley software firms hadn’t bothered to build digital solutions for the insurance business.
Wallace was convinced there was space for a focused, professional software company to speed automation and rake in fat profits. DiPiano’s reply: “That’s fantastic. How would you like to invest with us, and run the company?”
Wallace held DiPiano off for a month. He couldn’t tell him why, but he was selling FullTilt -- a publicly-traded company -- to QAD Inc., and couldn’t risk even the appearance of tipping anyone off with inside information.
He took the iPipeline job, with backing from insurer clients, NewSpring, and other investors. One condition: Wallace quizzed Berran to make sure his ego could accommodate being moved aside from the CEO office, so Wallace could do what DiPiano brought him in to do -- “scale the company up.”
Berran embraced Wallace as a mentor, and slid over into the chief operating officer and chief financial officer roles. Wallace laid out a strategy -- they would automate applications successively, for agents who sell policies, distributors, and brokers who bundle them for insurance carriers, and the carriers themselves, who would endorse the effort and help persuade the decentralized agents and brokers to go along. Where useful, they would buy and upgrade software firms targeting later stages. Cash from the quote system, LifePipe, enabled iPipeline to fund most of its 11 acquisitions and product development.
iPipeline had considered an initial public stock offering (IPO) in 2015, when its sales topped $60 million, notes marketing chief Mike Persiano, but decided a private sale “would be more beneficial” to employees and investors, given the volatility of the stock market at that time. So the next year its venture capital owners, led by NewSpring and early investor Volition Capital, of Boston, sold iPipeline to Chicago-based Thoma Bravo for $420 million.
Among the company’s hires in this period: Paul Melchiorre, a South Philly native who had risen to chief sales officer at German business software giant SAP’s U.S. headquarters in Newtown Square, as President. Melchiorre didn’t wait around for the second sale, moving to San Francisco to run red-hot business-planning software maker Anaplan.
Thoma Bravo was on a Philly software-company buying binge. It also acquired the Radnor business-software maker Qlik, now based in King of Prussia, for $3 billion; the manufacturing-software maker Elemica, of Wayne; and the human-resources software provider Frontline Education, of Malvern.
Cofounder Carl Thoma had a longstanding Philly connection: his previous firms invested in a couple of payment technology firms founded by payments genius Bipin Shah, who developed the MAC Card for the former Philadelphia National Bank (later CoreStates) in the 1970s.
Thoma paid around 17 times iPipeline’s cash flow (profits before financial expenses). The firm imposed strict spending and sales metrics and monitoring systems in the first few months, but then left Wallace and his team to keep expanding iPipeline’s services menu. “We accelerated our growth and we increased our profitability” using Thoma’s metrics, Wallace said. They doubled sales and boosted profits, winning a fat price increase when Roper called three years later. Roper paid 20 times cash flow -- a fat increase.
Wallace is turning the CEO’s job back to Berran, who at 46 has the benefit of a decade as Wallace’s right hand in client negotiations, merger consolidation, hiring, and the fast-changing needs of software teams. The two are close friends, Wallace says, and “Larry is a great CEO. I’m a big believer in succession planning. You surround yourself with really good people, your job is a lot easier.”
He’s not leaving yet. Wallace has taken on founder Atlee’s former title, as head of strategy and focusing on future acquisitions. “In five to seven years, we can double the size of this company again.”