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HaystackID has seen both organic and inorganic growth in the past several years, as it has acquired companies such as eTERA Consulting, Inspired Review and Envision Discovery. Now, as the company looks to take the next leap forward in its evolution, it has brought on a new funding partner.

The e-discovery company announced today that it has completed a strategic recapitalization with private equity firm Quad-C Management. Financial details of the deal were not announced. Through this recapitalization, HaystackID brings in more funding beyond what it brought in with a similar deal with Knox Capital and others in 2017.

HaystackID CEO Hal Brooks told Legaltech News that the new partnership was something the company actively courted, having felt like it reached the ceiling of its ability to grow with old funding partners. He sees the Quad-C partnership as an opportunity to grow with a firm that knows the industry—Quad-C was also an early investor in fellow e-discovery company DTI (now Epiq following a 2017 merger). Brooks explained that Quad-C was looking for an e-discovery partner to re-invest in the industry around the same time.

"Quad-C understands the inquisitive nature of the space. The best way to put it is it was a perfect storm opportunity," Brooks said.

In recent years, HaystackID has moved to a more corporate-centric business model; Brooks estimates that more than 70% of the company's revenue is directly billed to clients, as compared to working through a law firm. That recent shift in its business model helped attract funding, he added. "They were impressed that we had moved in that direction so quickly, and knew that's where they were going to find another investment vehicle. That's where they wanted to be."

The company does not expect any major changes following the recapitalization, either to its employee base or to customers. What they do expect, though, is further growth, particularly in the left-side of the EDRM with cybersecurity and information governance. Brooks also pointed to growing the company's international base as a goal, since "as you move into the corporate side of the business and get direct relationships with these corporations, many of them are multinational in scope and scale."

This may mean more M&A activity from HaystackID as it continues to grow in an industry that is rapidly consolidating. Brooks said the company is going to look at what he calls "strategic M&A." He explained, "We built this company out of strategic M&A, if you will, not just trying to make a land grab of clients and revenue. We really try to look at what we have today and our client base. And if we can acquire something that fulfills those gaps and the resources that we need, but also brings us the clients who fit our profile and doesn't dilute our business model, that's the best way to obviously expand."