The Recap

Is there investor interest in the TSDs? Yes. The PE firms play follow the leader. They make 10 bets hoping 2 work out. They make bets from 3-7 years depending on the type (VC or PE) and the LP (limited partnership fund that supplies the capital).

A Recap is one investor taking some chips off the table by selling some of its stake to another firm. In some cases, there may be an infusion of capital also, but that will come with another piece of the pie being eaten as well.

At this stage, after close to $1B in VC & PE money in the channel, does anyone wonder how the portfolios get their investment back?

We are 5 years from the first infusion.

Everyone talks about how much money flows through the channel. It isn't about how much flows through, it is about how much you keep.

With partner M&A at an all-time high, the number of selling partners are in decline. Yet we are supposedly in the greatest tech evolution ever. But with every emerging technology, most partners will not participate. How many partners sell data center or CX or cybersec? Large ones. Specialized ones. A percentage of the overall pie.

I have sat through too many AI demos and webinars in 2025. This is worse than 2003 when Broadsoft's second customer was trying to figure out IP-PBX.

I understand the press release about more investment in people and the fancy app, but shouldn't that be funded by the awesome double digit growth that the TSD's are experiencing? I know the only public TSD is only seeing 4-5% growth, but the privately held ones always claim to be doing thrice that. If so, shouldn't they be able to pay back their investors, hire and fund an app? What am I missing? Are they up against too much 90-10? Are they too bloated?

For those paying attention, there has been an increase in the musical chairs across the TSD space.

I am on calls weekly discussing the Channel, TSD's, and commissions to investors. There is interest in the Channel, because PE wants to figure out how to come in, automate it and suck all the revenue out of it like they do to just about every industry they touch. Hint: Bigger is never Better. Bigger is just Bigger.

For years, vendors have tried to get partners to sell something other than network and simple voice. Did something change and so many partners are now selling AI? Unlikely. I see too many vendors in the POTS replacement space because that is a simple product that does replacement for less money, the very thing that the CLEC industry thrived on. It makes a transactional sale easy.

CyberSec, AI, CX and so much more is not transactional. It isn't even productized to the point where Procurement understands what they are getting.

Getting a chunk of the partners to understand, use and sell AI will be a challenge at a time when TSDs are working on Recaps, exits, musical chairs and the same challenges that Accenture and its competitors are dealing with. Big Consulting need to hire many to train them up to be able to bill hourly, but first they do grunt work which AI can do cheaper. So does Big Consulting hire or not? At the same time, the clients want to pay Big Consulting outcome-based rates, not hourly. This is wreaking havoc with Big Consulting.

As enterprises struggle to upskill their workforce, a critical question emerges: How will TSDs equip their partners for the evolving technology landscape?

Without meaningful enablement, many partners will default to traditional network and voice solutions. Or as the pundits in this space are so famous for saying: these partners will die. Well, they haven't yet. Some have cashed out; some have retired; some still get on that hamster wheel and run, just slower.

Looking ahead, 2026 is shaping up to be transformative for the Channel. Recapitalization and Consolidation talks are in the works. 2026 will be a wild ride for the Channel. So much money is chasing AI and every Arbitrage genius and their grifter brother are chasing it, too. More than 80% of the AI being marketed is just Claude and ChatGPT repackaged.

I am happy that AVANT was able to recap. It is unfortunate that Ian and the other founders weren't able to exit. Maybe Ian wants to stay inside the pressure cooker a little longer. If you ever worked in the start-up world, a carnival of ideas, energy, pressure, pitch contests, investors, founders, and so much more, you would have a better idea of what we are heading into.

In 2026, Cox & Charter, AT&T & Lumen, Frontier & Verizon, and Zayo & Crowne Castle will all go through mergers. That is just what was announced. DC is messing with BEAD which is throwing off PE investors, who followed the BEAD money into the broadband space. Oops! Now there are transactions weekly in the ISP space. While numerous vendors go through M&A and a bunch of partner types (TAs and MSPs, especially) go through their own M&A, the investors of TSDs will look to recap, exit, or find some other way to recoup dollars after 5 long years of having that LP fund open.