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April 2, 2024

12 Years to Forever: Reflections on Norwest’s Partnership with Supply Chain Safety Leader Avetta

Construction workers in hard hats overseeing a construction site

I’m huddled in the back corner of my mother’s small two-bedroom apartment. She’s shouting at me to come join everyone. “What am I doing right now,” I ask myself.

It’s Christmas Eve 2012. I’m missing time with my family and the delicious Scandinavian smörgåsbord (and aquavit) awaiting me, while I try to convince a founder to stay the course and close the deal he had with us under LOI. But that’s what investors do when we need to get the deal done.

Him: “I just kind of feel like we put the car out on the lot with a lot of dents and scratches, and if we just prettied her up a bit, we’d maybe get a better deal.”

Me: “You could do that, and that deal might come along, but we can work together with you side by side to polish out all of the imperfections and get her ready for auction faster – all while mitigating the execution risks of getting there yourself.”

That entrepreneur was John Moreland. The company was Pacific Industrial Contractor Screening (or PICS Auditing, for short), now known as Avetta. Norwest closed that deal on December 31, 2012, and today we celebrate Avetta’s sale to EQT.

Closing Avetta, Before It Was Avetta

John Moreland and his co-founder Jared Smith started PICS in 2003 as a tech-enabled business service that helped large corporations manage their contractor screening and credentialing processes. We found the company in 2011 through some supply chain and compliance technology thesis work and began cold calling the team, making first contact in November 2012.

John and Jared were interested. Some partial liquidity was enticing after eight years of business building, and they feared potentially negative tax changes in 2013 with a new President in office. Our deal was predicated on our ability to move very quickly and close within 35 days of signing our LOI. We just managed to wire our minority equity investment on New Year’s Eve. Aquavit never tasted better than it did that night.

John and Jared (or as we came to refer to them, J&J) were classic entrepreneurs. They saw a large market opportunity and acquired as many logos as possible, as quickly as possible, to get contractors to then flow onto the PICS platform over time. Contracts? Who needed them! They were just a barrier to a sale. Technology automation? Not necessary! They could deploy humans to “stare and compare” at documents for inconsistencies before processing.

We saw the same tremendous opportunity they did. But we also knew it was necessary to implement the tools, processes, management, and technology needed to enable the company to scale to its full potential. So began our work.

The Invited Guests Roll Up Their Sleeves

We used their whiteboard a lot that first year. We discussed everything including pricing to process improvement to key hires to changes in the org chart, and many other facets of the business. Our approach of acting as “invited guests” in J&J’s business — honoring the legacy of what had worked while offering insights, resources, and a broad network of experts to assist in these strategic areas — quickly earned us their trust. They eventually asked us if we would be interested in investing more capital and taking control of the company. They each wanted some more liquidity for other life interests, and by that time, they had complete faith in Norwest to be good stewards of the company and their collective shareholdings.

We said yes, and everyone agreed that with the transition of ownership, the company might benefit from a more seasoned operating executive to lead the company on the next leg of its journey. J&J weren’t going anywhere. They wanted to remain on the board and as advisors. But they did recognize that they might not be best equipped to tackle the challenges ahead.

New Executive Leadership for Transformational Change

Enter John Herr. John, who worked with us at another portfolio company called Adaptive Insights, had just become available in 2015. We brought him on as CEO because we knew he could execute our go-to-market approach for PICS and take client conversations to a more strategic level. He helped lower operating expenses while pushing the corporate culture to one of full accountability, with fewer “smoke breaks” over the course of the day.

A photo of Avetta CEO John Herr sitting on a large wicker chair
Former Avetta CEO John Herr

When we first invested in PICS, contractors viewed the required participation on our platform as a “tax” on their business to work with their respective clients. We worked with John and his team to begin the transformation of the platform — from one some users viewed as burdensome to a solution offering enablement, empowerment, and revenue-generating opportunities. Avetta was born.

Avetta began growing quickly and making good money. At Norwest, we never really “worry” about what the path to liquidity looks like. Build a business right, build it to last, and liquidity will take care of itself. By 2016, the inbound demand from the PE community was so high that we engaged a bank to explore a potential new partner. Welsh Carson won the process, and when we had the opportunity to reinvest alongside them for the next ride, it wasn’t a very difficult decision — we jumped in with both feet.

At Norwest, we never really “worry” about what the path to liquidity looks like. Build a business right, build it to last, and liquidity will take care of itself.

At the same time, John Herr was looking to step back from his day-to-day duties, so in 2019 we hired Arshad Matin to assume the CEO role. The next phase in Avetta’s growth began with a focus on relieving technical debt, further building out and upgrading the senior team, truly globalizing our efforts across all industrial verticals, and making our platform a one-stop shop for contractor risk management.

A photo of Avetta CEO Arshad Matin
Avetta CEO Arshad Matin

Arshad and team have done an amazing job building the infrastructure to allow Avetta to continue scaling as the leading supply chain safety and sustainability experts. Today, Avetta works with 130K+ contractors and 1.5M+ workers in over 36 languages around the globe.

12 Years to “Forever”, a Secure Future for Avetta

The one certainty in business is change. New challenges will emerge and Avetta’s ability to adapt and evolve will be critical to its continued success. Our 12-year journey with the company has been a prime example of what it takes to successfully scale a company. During our tenure we’ve seen remarkable growth:

  • Expanded contractor count by 6X
  • Increased employee count by 10X
  • Grew revenue by close to 20x
  • Boosted earnings by over 100X

What leverage; what a business! Thinking back to John Moreland’s car analogy, I’d say this beauty would be a Best in Show contender at the auction.

Most importantly, Avetta has saved hundreds, if not thousands, of contractors from severe workplace accidents or even death. We have truly done well while doing good.

Avetta has saved hundreds, if not thousands, of contractors from severe workplace accidents or even death. We have truly done well while doing good.

Although our time with Avetta is about to end, this is a “forever” company that will benefit EQT and whomever might own the company down the road. Thank you, J&J, John, Arshad, and all of the other great executives and team members who have helped Avetta scale to be the leader in supply chain safety that it is today — and will be tomorrow.

Now back to those Swedish meatballs!

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