Inside the Deal: How Incident IQ is Transforming K-12 Workflows
Incident IQ is a K-12 tech support and asset management platform that is revolutionizing the way school districts manage workflows. The powerful SaaS platform delivers modular solutions that help institutions drive efficiency and productivity across daily operational workflows such as IT, facility, events and HR. Ultimately, its high ROI solution delivers on its impactful mission of shifting school leaders’ time from manual, inefficiently managed workstreams to an environment of increased time and attention for driving better classroom outcomes.
Baird served as the exclusive financial advisor to Incident IQ on its strategic investment from Cove Hill. In this latest Inside the Deal, Baird’s Software team shares what made Incident IQ’s positioning in the K-12 market differentiated, and why it’s a compelling investment.
What makes Incident IQ’s business so unique? What made the company appealing to investors?
There are a number of attributes that made Incident IQ stand out. It starts with metrics – Incident IQ’s 50%+ annual growth profile combined with near-perfect gross retention is unmatched across the vertical software landscape. For buyers, it’s easy to extrapolate those metrics into product superiority, efficacy and delivering on value proposition.
Those metrics were bolstered by the growth runway of Incident IQ. Across the K-12 software landscape, there are differing levels of adoption maturity. Solutions like student information systems (SIS), for example have a high degree of adoption maturity. However, the solutions Incident IQ provides (IT service management, IT asset management, facility and event management, etc.) are much more nascent in overall adoption by school districts across the country. Furthermore, school districts that have attempted to adopt a comparable solution have tended to use a horizontal, corporate solution that is not purpose-built for K-12’s unique workflows. As such, Incident IQ has seen success in displacing those competitors and taking share, ultimately turning what could be perceived as a “red ocean” into a “blue ocean.”
While Incident IQ has not done any M&A to date, it has proven its ability to organically introduce new modules that seamlessly tie into its broader platform, creating the ability to organically grow the business into something larger over time and drive incremental growth through proven cross-sell. Additionally, the management teams’ vision for the business and proven results were key to harnessing buyer engagement and desire to partner with Incident IQ.
What should potential buyers know about the K-12 software space going forward?
We continue to see increased interest from vertical software investors with regards to investing in K-12 software, particularly in workflow software that sits “outside the classroom” or powers the classroom (put another way, is not related to content or curriculum). There remain ongoing questions about the impact of the reduction in stimulus funding brought about by the unprecedented Elementary and Secondary School Emergency Relief Fund (ESSER) funding packages on K-12 schools. However, these impacts will be indirect as ESSER funding was not explicitly designed for the adoption of workflow-related software solutions. School districts around the country tend to be well behind the curve on overall digital adoption trends and are realizing that adoption of workflow software solutions like Incident IQ can have a high ROI on district productivity and efficiency such that districts are finding the budget dollars to make these investments.
Furthermore, many of the best-of-breed K-12 software solutions are very sticky within the install base and have retention rates that rival best-in-class SaaS levels. What’s more, the K-12 software market remains very fragmented. There are several players that are rapidly growing, but there is a very small number that have exceeded $100M in annual revenue (i.e., PowerSchool, Frontline, etc.). Over time, we expect continued consolidation in the space, particularly as schools have a tendency to rationalize their vendor base and “do more with less.”
Does this outcome change your view on the broader software valuation landscape?
It might be cliché, but we are still seeing a “tale of two markets” in the software landscape, as we wrote about in our recent software market update. A+ assets like Incident IQ are seeing substantial interest from the buyer community given a dearth of high-quality software investment opportunities that are currently actionable.
While difficult to quantify, this deal scarcity is driving a real premium on valuations, not to mention driving real competitive tension in processes, which in turn is also helping to drive up values. However, not all software businesses are built the same or seeing the same engagement and, in turn, valuation reception by buyers in the market. That said, we continue to see the overall valuation picture improve with a more constructive deal making environment than we saw in 2022 or 2023, thus we stand behind our prior view that there are “better days ahead.”
