Bain Capital’s David Humphrey On Betting $750M On Nutanix

‘[Nutanix] solves a really valuable and important problem for its customers and we think Nutanix does so in a way that’s differential relative to VMware, who is of course a formidable competitor, but even relative to them,’ says David Humphrey, managing director and co-head of Bain Capital’s North American private equity business.

Bain Capital injected $750 million of funding into Nutanix to take the software star to the next level after witnessing Nutanix’s technology differentiation, massive growth opportunities ahead and its transition to subscription, according to Bain Capital’s David Humphrey.

“In the core of where Nutanix started in the hyperconverged infrastructure market, Nutanix is essentially a 50 percent share player together with VMware and has really created that market which we think is still underpenetrated and has the opportunity to grow for quite some time,” said Humphrey, managing director and co-head of Bain Capital’s North American private equity business. “[Nutanix] solves a really valuable and important problem for its customers and we think Nutanix does so in a way that’s differential relative to VMware, who is of course a formidable competitor, but even relative to them.”

Humphrey has been with the global investment firm for nearly 20 years, currently responsible for $10 billion in technology portfolio investments at Bain Capital with a focus on software, hardware, media and telecommunications markets. He became a board member at Nutanix last year after Bain unveiled its $750 million investment in the San Jose, Calif.-based company.

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“We look for businesses that have some real competitive advantages in what they do. They solve a really important problem for their customers and they have some great opportunities to grow. If those things come together, we feel there’s an opportunity for outstanding investment returns,” said Humphrey, who is also a board member at various IT companies including Rocket Software and NortonLifeLock. “So we built our whole strategy and also our team around supporting businesses that share those characteristics. Nutanix very much so fits that description.”

Humphrey said Bain sees a huge opportunity to partner with Nutanix “to accelerate its growth and support its transition towards a more subscription-oriented model,” which the company has been undergoing now for more than three years.

Tim Joyce, president and CEO of Orinda, Calif.-based Roundstone Solutions, said he agrees with Humphrey that Nutanix’s technology differentiation and market opportunity ahead is unique.

“Nutanix is delivering a differentiated way to do IT infrastructure. It’s not only hyper-converged infrastructure, it’s the web-scale architecture that they’ve created,” said Joyce, who is a Nutanix channel partner. “With many companies ‘reflexing’ to the public cloud, the question becomes, ‘How do you manage both an on-premises and public cloud infrastructure at the same time?’ Well, Nutanix is the only vendor that allows customers to manage both on-premises with public cloud while also allowing users to move workloads between public clouds and back again.”

Roundstone’s Nutanix business in the first quarter of 2021 “is up significantly” from previous years and the solution provider is witnessing a good pipeline of opportunities with Nutanix. “From what I can tell, end users are increasingly looking at Nutanix across the territory,” Joyce said.

Nutanix added 730 new customers during its recent second fiscal quarter, bringing the total number of customers to 18,700. Last month, Nutanix reported second quarter revenue of $346 million, representing flat year-over-year sales growth. The company’s operating expenses dropped from nearly $400 million in second quarter 2020 to around $350 million in the second quarter 2021.

Nutanix generated $159 million in annual contract value (ACV) billings in its second quarter, up 14 percent year over year. The company’s ACV run rate now stands at nearly $1.4 billion.

Nutanix co-founder and longtime CEO Dheeraj Pandey stepped down from his leadership role in late 2020, replaced by VMware’s former global chief operating officer Rajiv Ramaswami.

“Dheeraj has stepped back from the business, that was his own decision,” said Humphrey. “We’re supporting Rajiv and the business as they build their next chapter. We’re very excited about Nutanix.”