Business & Tech

Fuze names new CEO on heels of massive investment round

Earlier in February, Cambridge office software company Fuze Inc. turned heads by announcing a new investment round of $104 million. Now the company has hired a new chief executive, who most recently presided over the sale of another New England tech company to a deep-pocketed acquirer.

Colin Doherty will replace Fuze cofounder Steve Kokinos, who becomes the company’s executive chairman, Fuze said Thursday. Doherty, a veteran tech executive, will help prepare Cambridge-based Fuze for an initial public offering, which the company has said could come in 2018.

Fuze is moving quickly to capitalize on the growing market for office communications technology. Fuze sells phone, videoconference, and messaging software, putting it in competition with well-funded startups such as Slack and huge companies like Microsoft, Google, Amazon, and Cisco.

Advertisement

“As an entrepreneur, you have to make the right decisions to set your company up for success,” Kokinos said in an interview. “One of the things we’ve been focused on over the past year or so is getting the right executive team in to scale up the business.”

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Doherty most recently worked as chief executive of Dyn Inc., an Internet traffic-routing company based in Manchester, N.H., that was purchased by Oracle Corp. in late November, less than two months after Doherty replaced cofounder Jeremy Hitchcock as chief executive.

Doherty and Kokinos, however, said a quick sale was not in their plans for Fuze. Kokinos also said the chief executive change was not mandated by the investors in Fuze’s new round, which was led by Boston financial giant Wellington Management Co.

“All of our investors, old and new, were pretty clear about what our strategy is and how we plan to grow the business,” Kokinos said. “It was a pretty straightforward discussion all around.”

Fuze was founded in 2006 under the name ThinkingPhones. It acquired videoconferencing startup Fuze in 2015 and adopted the name after raising its first large investment, a $112 million round announced in February 2016.

Advertisement

The company employs about 700 people, with about half at its Cambridge headquarters.

Gartner Inc. research analyst Bern Elliott said Fuze’s growth reflects an emerging, lucrative market for software that can help white-collar workers collaborate with their colleagues. Gartner estimates spending in the market will grow from about $12 billion in 2016 to $22 billion in 2020.

There’s no clear winner in the sector yet, which means that smaller companies with investment backing can compete, Elliott said. “Yes, there are some companies that are really big and established,” he said. “But that doesn’t mean they’re always going to win.”

But Fuze could be hampered by having a relatively unknown brand name and the growing pains that come with scaling a small company, including less experienced staff, Gartner said in a recent market report.

Fuze could become an attractive acquisition target for some of the larger companies trying to make a dent in the office communications market, said Jeff Bistrong, who heads the technology unit at merger-focused investment bank Harris Williams & Co.

Advertisement

That would reflect larger market trends. Renaissance Capital, an IPO investment manager, recorded just 105 IPOs nationwide last year, the fewest since 2009. Mergers and acquisitions, meanwhile, reached $2.1 trillion in Europe and North America last year, the highest amount ever recorded by research firm PitchBook, enabled by large stockpiles of corporate and private equity cash.

“The fact that they’ve got a CEO who may be able to either take the company public or facilitate a strategic sale before that happens should be no surprise,” Bistrong said. “There are thousands of M&A deals in technology every year, and only a handful of IPOs.”

Curt Woodward can be reached at curt.woodward@globe.com. Follow him on Twitter @curtwoodward.