SurveyMonkey deal demonstrates power of late stage private markets

News Report: SurveyMonkey Valued at US$2 billion as Some Investors Sell Shares

Once upon a time, the only way a tech company could raise $250 million was via an Initial Public Offering. Then along came Facebook, and the mold was broken. Over the course of a few years, Facebook did a series of financing transactions, both direct and via secondary platforms such as SecondMarket. Several institutions and Family Offices bought shares privately, and made out handsomely once the IPO froth had settled. Twitter followed in the same path, and large “late stage” fundings are now commonplace for the high quality pre-IPO cohort — whether they be debt or equity or a combination of each.

From the company standpoint, these brokered stock deals served a purpose. Early (primarily former) employees and Series A venture capital funds got the chance to take some money off the table. And, if the need was there, CFOs had a third party valuation should they want to tap into this demand to raise some private capital for the company’s own balance sheet, too. Underwriters benefitted as well, as these “fur coat” transactions removed some of the pressure to include a large secondary component in any eventual IPO. Retail investors would also benefit by the reduced overhang on the stock following the IPO.

The success of these large private offerings, often without any of the hooks that usually come with traditional VC rounds (such as Board rights or vetoes on material events), served every master. Although each generation of VCs has but one or two Facebooks, the success of these pre-IPO transactions appears to have opened the window for far smaller names with substantially less buzz.

The most recent examples of large private rounds are Survey Monkey and Vancouver’s BuildDirect. This from The Wall Street Journal:

A group of large money-management firms are valuing SurveyMonkey at close to $2 billion in a new round of funding that will help fuel the online questionnaire service’s expansion into corporate software, said a person familiar with the matter.

The Palo Alto, Calif., startup raised $250 million from new investors including T. Rowe Price , Morgan Stanley Investment Management, Fidelity Investments and Baillie Gifford, the person said. A portion of the funds will be used to buy back stock from employees and previous investors, including Bain Capital Ventures, Spectrum Equity and TPG Growth.

SurveyMonkey could use the new funding to expand its tools for corporate customers. First offered a year ago, SurveyMonkey’s enterprise product gives businesses more analytics around survey results, lets them allocate billing to departments and works with other software like Salesforce.com Inc.

The company could also use its cash to ramp up mergers. SurveyMonkey made its first acquisition in more than two years in August, when it bought smaller Canadian rival Fluidware for more than $20 million.

Previous investors, including Google Capital, Iconiq Capital, Tiger Global Management and The Social+Capital Partnership, all participated in the new round of funding, according to the person with knowledge of the deal.

SurveyMonkey was last valued at about $1.3 billion in a round of funding in January. The startup has raised more than $1.2 billion in debt and equity as it puts off an initial public offering.

The cynics will say that an early stage company that has issued more than US$1.2 billion of debt and equity securities, and is “only” valued at US$2 billion, doesn’t hold a candle to Facebook or Google. The larger point is that the money management world is so awash with cash that a company that had US$113 million of revenue in 2012, which is small by global standards, can pull this off. As asset allocation decisions go, can you blame them, given the recent rout in the commodities markets? Private tech looks like a far safer place to be right now than oil and gas.

Last week’s BuildDirect financing may well have been another example, as BMO Asset Management was cited as a new investor in that company’s recent $50 million offering, along with existing VC firms Mohr Davidow Ventures and OMERS Ventures. Although it hasn’t been reported on, the use of BMO Asset Management in the press release, rather than BMO Capital Partners, leads one to believe that the BuildDirect shares went into the hands of high net worth clients, rather than the bank itself (as was the case with the 2013 financing of Real Matters, for example).

Some have called this trend a “democratization” of the markets, although I think that’s misplaced. When firms such as Fidelity and T. Rowe Price acquire the shares of private companies, they are definitely giving private company entrepreneurs more staying power, just as our own Growth Capital financings do at Wellington Financial. The recent track record suggests this cohort of investments will play out better than the local 2000-2001 vintage did, when many private companies raised large rounds (such as Eletrofuel and Metrophotonics), only to fritter the capital away.

MRM

 
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A flurry of deals to end the year

The press release won’t be out for another 30 minutes, but our loyal blog followers deserve to get the early scoop.

Our latest financing, this time for Montreal-based iPerceptions, represents our fifth Growth Capital transaction announcement in the course of the past six weeks.

iPerceptions is a leading digital customer research company specializing in voice of the customer analytics. Many top Fortune 500 companies, such as Dell, InterContinental Hotels, Logitech, and Ford trust iPerceptions to improve the customer experience across their digital platforms. As you may recall, our first of three financings for Vision Critical was in October 2006, so we have a wealth of experience in the customer intelligence sector. iPerceptions is backed by Telesystem and XPND Capital.

We hope to close one more financing before the end of 2014, and if that comes to pass, our team will have closed more than $90 million of commitments over the course of the year.

That surpasses our previous deployment record of $77.5 million ($87 million including syndicated portions), back in 2007. Thanks to all of our new portfolio company entrepreneurial partners and their VC backers.

MRM

 
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Thanks to everyone for a wonderful 10 years

It was ten years ago today that I went “full-time” with Wellington Financial, and I wanted to thank everyone who has been part of the exciting journey to date. I am grateful.

The first few years of our business (August 2000 – December 2003) are what I fondly refer to as the “hobby” window, when our original $7 million Fund I served as an unintended test case for what was to follow. Things truly kicked off with the $20 million first close of Wellington Financial Fund II in December 2003, when Skylon’s Sue Coleman, Steve Diamond, Geoff Horton, Gord McMillan, John Varghese and Jim Whitaker decided to back our first “externally-funded” initiative. What was targeted to be a $40 million Fund II eventually grew to an $83 million vehicle. When two of our new LPs suggested that this larger capital pool warranted that I turn the hobby into a full-time job, I agreed and resigned as an Managing Director from Orion Securities effective December 1, 2004.

Our Limited Partner investors, as well as my colleagues, both present and past (full-time and on the advisory side), have made it all worthwhile. I’ve had the pleasure of getting to know hundreds of entrepreneurs and VCs along the way, and their passion and commitment is always inspiring. If you ever want to be humbled as a CEO, just spend some time with another entrepreneur who’s really, really good at what they do! That we get to participate in your own business success is a luxury of our role in the ecosystem.

The support and guidance that our entire team, and myself in particular, have received from our Chairman and lead investor, Ken Rotman, each and every day, as well as countless hours of mentoring from Jeff Chisholm, our external independent Credit Committee member, are a large part of why we’ve continued to thrive through some difficult economic and financial windows — both for the North American economy as well as the Canadian innovation ecosystem in particular.

That our firm is now the most active Canadian institutional investor, year in and year out, in the North American innovation ecosystem is a tribute to the hard work of each and every individual who has had a role to play in our firm’s evolution along the way.

Not to rush anything, but I’m excited about what the next 10 years will bring. It’s my sincere hope that you’ll continue to be part of the journey.

MRM

 
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When did the Toronto Star decide “progressive” was a synonym for NDP?

In case you haven’t noticed, the Toronto Star recently decided to dispense with the New Democratic Party descriptor when referring to NDP-connected municipal politicians. They are now, it would appear, “Progressives.” I can’t tell you exactly when this change took place, and it certainly hasn’t been codified in the Star’s Journalistic Standards Guide. But the use has become so rampant that I think “progressive” is now the officially sanctioned Star synonym for “NDP”.

Sounds much more harmless, doesn’t it?

It first came to my attention when the Star used the “progressive” word to refer to at least six different municipal candidates on its editorial slate for the recent Toronto City Council elections. Each of the six appears to have strong NDP ties, yet the Star’s editorial team found a way to utilize “progressive”, instead. As in:

“…he is a progressive voice on city council”
“…a forthright advocate of progressive causes”
“She’s a progressive with strong history of grassroots community work…”
“…an outspoken advocate for his ward and for progressive issues on council”
“..a council progressive”
“…a compelling and progressive presence”

The Star’s Education Reporter followed suit a few days later, when covering the outcome of the Toronto District School Board elections. “Progressive” was used when “NDP” would have been technically correct.

Just this morning, the Star’s City Hall bureau used the descriptor “Council’s Left wing” and “Progressive Councillors” interchangeably:

Rob Ford was elected mayor four years ago on a promise to take a sledgehammer to city council, its transit plans, and its budget. Immediately after he won, council’s left wing began trying to figure out how to thwart his agenda.

John Tory was elected mayor Monday on a promise to bring council together. He will get a grace period.

Tory, a moderate conservative, will be granted an opportunity to be the consensus-building pragmatist he said he would be, progressive councillors said in interviews Wednesday.

As a noun, “progressive” refers to someone who is an advocate of social reform, according to the Oxford Dictionary. As an adjective, it would imply someone “favouring change or innovation.” Golly, I think I fall into each category, and I’m certain that most of my political mentors, including Norman Atkins, Dalton Camp, Pat Carney, Mary Collins, Eddie Goodman and Hugh Segal would all see themselves as advocates of social reform, social change and innovation.

Of course, the antonym of “progressive” is generally “conservative”, “regressive” or even “reactionary.” Although “left-wing” politics are often associated with the late 19th century Progressive Movement, in the case of Toronto politics, it seems as though the Toronto Star is doing a disservice to its readers by hiding a politicians’ New Democratic Party association with this potentially less-threatening “progressive” moniker.

Only 20% of Torontonians voted for the NDP’s Mayoral candidate. And yet, upwards of 35% of Toronto Council seats are going to be held by NDP-associated politicians for the next four years. And all that goes with that brand, for better or worse.

For the media to pretend otherwise can only be a conscious, overt and inexplicable effort to deny a long-standing reality on Toronto City Council: there are no “party politics”, except when it involves NDP-backed candidates advocating the NDP agenda.

MRM
(disclosure – this post, like all blogs, is an Opinion Piece and personal view and does not reflect the views of the TPA/WDBA (boards or staff) or the Federal government.)

 
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Wellington Financial leads $25 Million Growth Capital financing to Market Leading On-Demand Software Company

There’s plenty going on at the firm. The most tangible example is that we just led a US$25 million venture debt financing for a rapidly growing Silicon Valley-based On-Demand Software company. The company’s existing investor base includes a number of prominent Silicon Valley venture capital firms, and has many Fortune 1000 customers from around the world.

Over the course of 2014, Wellington has led approximately US$70 million of growth capital financings to seven U.S.-based, VC-backed growth companies, advancing US$60 million. More on that tomorrow.

MRM

 
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