A $100 million-plus software company called Arcserve has just chosen Minnesota and will be moving in December into new headquarters in Eden Prairie, overnight becoming one of the largest software companies based here.
By the second quarter of next year, Arcserve hopes to have 100 employees working here, all hired without any taxpayer assistance.
"This is really about the culture," CEO Mike Crest said, explaining the decision to be in Minnesota. "It's about building a company where you have access to great talent."
This turned out to be an interesting little case study in corporate relocations. Sometimes it's easy to forget that what's easily the top priority for many businesses when picking a location is making sure there are enough highly skilled and hardworking people to hire.
By this measure it seems cold-weather, high-tax Minnesota competes just fine.
Arcserve, by the way, really could've gone nearly anywhere. Its customer base is global. Its principal shareholder is from Los Angeles. It has staff from North America to India. And as a newly independent company carved out of a big one, it doesn't have to worry about enticing any headquarters employees to relocate.
What Arcserve couldn't do is stay inside the headquarters of its former parent, New York-based CA Technologies.
Arcserve had been part of CA Technologies since 1996, when the creator of the product and brand, Cheyenne Software, got acquired by CA. Its Arcserve product had been developed to help network administrators back up and then recover lost data.
Arcserve became available because CA Technologies wanted to more tightly focus on serving the global corporate giants. Those big companies don't use the Arcserve product. The 43,000 users worldwide are mostly far smaller businesses, from maybe 5,000 employees down to perhaps 500. Arcserve was a profitable business that just didn't really fit anymore at CA. CA looked for buyers and found Marlin Equity Partners, a Los Angeles-based private equity group with a lot of experience buying businesses from larger companies. Crest, who had been with CA Technologies for 16 years, was the business unit's last general manager within CA. He made plans to stay with the business as CEO.
Crest said it is not exactly easy to pull any business out of a large company, when everything from customer relationship management software to the 401(k) plan is enmeshed in the systems of a big company. In this case Arcserve had employees from multiple departments, like sales, marketing and product engineering, all working together in one business unit. That made it far easier.
Arcserve LLC started life this summer with a core of experienced employees, a CEO, a new, deep-pockets principal owner, a well-known brand and a big installed base of users. What it didn't have was a home office or anybody doing home office jobs like chief financial officer or head of human resources.
As of last week the office with the greatest number of employees was a product development facility in Beijing. But Beijing certainly wasn't a candidate for the corporate headquarters.
New CEO Crest, a graduate of Minnesota State University, Mankato, lives in Minnesota. The chairman of Arcserve's board of directors, Marlin Equity operating partner Robin Pederson, has a background in management at Twin Cities software companies. He also happens to live here. Crest said it wasn't so simple that he and Pederson live here so the company had to be here. The decision to locate the headquarters in Minnesota, he said, was carefully considered.
And what Marlin Equity and Crest agreed on, based on firsthand knowledge of the local market, is that they could find the highly skilled people here that it takes to build a global corporation.
"Our investment thesis with Arcserve is to grow it dramatically," said Pederson, a Marlin equity operating partner. "It's in a very hot space. We needed to be in a good location where we could attract a lot of talent, because as this place grows we are going to need access to a deep talent pool."
Since the deal closed Crest has hired the chief financial officer along with several other positions in finance, a chief marketing officer, a VP of human resources and a VP of information technology. They are now working out of temporary space in Eden Prairie while their offices are being finished.
On a visit this week the new chief marketing officer, Rick Parker, handed over a list of the positions they are looking to fill now, a total of 49. These jobs include product marketing manager, communications director, a director of inside sales and a contract manager.
When asked about Arcserve's aggressive hiring plans, board chairman Pederson responded, "it is going to be a lot more than that. We're going to be hiring in waves, let's just put it that way."
Crest said the company will likely fill the hundred local jobs in his plan by the spring of next year, but that doesn't take into account the growth aspirations he and Marlin Equity have. For starters, Crest described the market as more than $6 billion and growing at 9 percent a year.
One opportunity for growth is to add more capability to Arcserve software, to help customers use increasingly complex combinations of backup and storage technologies.
He thinks there is enough opportunity, including through acquisitions, to grow much faster than the 9 percent rate of the overall market.
All of which means a new headquarters for a new Minnesota company might shortly be kind of a tight fit.