Higher Logic announced that it has accepted a $55 million investment from JMI Equity. Read the press release.

Rob Wenger, CEO of Higher Logic, posted about it in HUG (Higher Logic’s user community) this morning. Here’s an excerpt…

1. This is an INVESTMENT – not an acquisition. Not a sell-out. The current HL team is still running the show. But the money and guidance we will get from our new partners at JMI will help us grow more, better, and faster over the coming years.

2. We did this because we have had phenomenal growth over the past few years. (snip) And we want to keep it up. This investment will help us do that while preserving and even improving the level of customer service you deserve and provide a safety net while doing so.

3. We want to invest even more in the product! You all have a lot of great ideas that you share with us every day. We get additional ideas from partners and prospects, and people in the for-profit world as well. We always wish we could add more, faster. Now we can.

Let’s put this news into context.

• If you want to understand what private equity funding is, and what the implications are for you as a customer of an equity-backed company, check out this series of articles at ReviewMyAMS.com.
• Last year, online community software vendor Small World Labs was — unlike this deal — 100% acquired by Personify, which is an equity-backed company.
• The number of technology companies in the association market taking private equity money continues to grow.
• From a scan of its investments, JMI is not heavily invested in the association market. Only one of its investments (Blackbaud) stands out as a company even somewhat aligned with the association industry.

Here’s what I see as the likely outcomes of this investment:

1. With more money to throw at development, the product will improve, which is remarkable because it’s already an amazing platform that has been getting incredibly better every year. It’s difficult to imagine the new heights to which Higher Logic will go with this treasure chest to invest in the product.
2. There will be changes at Higher Logic. Prepare yourself now. There will likely be turnover and new personnel. Some of the senior management team may resign, be fired, or be re-assigned. After an investment we usually see changes to customer service processes. Buckle up; this could get interesting.
3. Higher Logic may pivot to put even more emphasis into its commercial (for-profit) business. That line of business is more profitable. This shift of emphasis, should it happen, might be to the detriment of Higher Logic’s association clients.
4. Look for Higher Logic to potentially acquire or invest in another association technology company. I wouldn’t be surprised to see them acquire a job board, advertising agency, learning management system, social media management platform, or even an AMS.
5. There will be another investment in Higher Logic within the next 10 years. This is a certainty. JMI has invested in 120 companies and has completed 85 exits in its history. Private equity investors must be paid back on their investment, and that requires that another transaction take place. Higher Logic’s owners may retake complete ownership of the company, they may take another round of investment from another private equity fund, or they might even go public.

Is this a good thing for Higher Logic customers? Only time will tell, but if this is, in fact, a minority investment, I’m optimistic. The worst possible outcome for investments like this one is that the relationships that the company has built get disrupted by outsiders who don’t understand the association ecosystem. The Higher Logic team is probably the most tuned-in to how the association community works in the entire association technology industry. Knowing that Rob Wenger and Andy Steggles are still in charge, I’m hopeful that the relationships they’ve developed over the years will continue.

I’m also excited to see the acceleration of product enhancements. It’s really hard for me to conceive how much this money will improve the core product.

Congratulations to Rob, Andy, Mark, Conor, Ben, and the entire Higher Logic team. Now don’t mess this up 😉

In full disclosure, Higher Logic is an Online Community Results partner and customer.