First quarter 2021 was a busy season for technology exit. With a warm period approaching the final quarter of 2020, it was no surprise that Tech Upstart pursued liquidity through a wide variety of mechanisms, beginning with the start of the new year.
There were IPOs, direct listings, PE deals. Hell, we even saw enough SPAC that we lost track of something; Amidst all the noise, you occasionally miss how well your ears tune.
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Each route to exit is still open to later stage startups: the IPO market was welcoming until a few minutes ago and private equity firms are piled up with cash and paying higher multiples than in more common times Are ready to do. And there are enough SPACs to make the entire recent Y Combinator class public.
Choosing the best option from a buffet option is an interesting task for the CEO of a startup and their board.
DigitalOcean went public through a traditional IPO, raising a slug of capital in the process. The SMB-focused public cloud company feels like a somewhat obvious IPO candidate when you read its results. The exchange talked about the choice with the company’s CEO, Yancey Spruill.
In contrast, Lach decided that a SPAC out of the gate was its best route. The exchange caught up with the company’s CFO, Garth Mitchell, about the transaction and why it made sense for his company.
And, finally, The Exchange spoke with AlertMedia founder and CEO, Brian Cruver, about the decision to sell his Texas-based company to a private equity firm.
To prevent this post from reaching an astronomical word count, we will give a brief description of each deal and then summarize the company’s views on why their liquidity choice was correct.
Three ways of liquidity
A few notes: Kicking with DigitalOcean, first of all, the company has been very public about its growth rate over the past few years. We knew it had an annual run rate of about $ 200 million in 2018, $ 250 million in 2019, and about $ 300 million in the first half of 2020. It later announced that it achieved this score in May of last year.
So when DigitalOcean decided to go public, we did not bow down. The company wound up at a price of $ 47 per share, the high end of its range. Since then, its stock has struggled somewhat, falling below $ 37 per share before recovering to $ 43.80 at the end of yesterday’s trading.
That’s all. Why did the company choose to go public through a traditional IPO? Sprill said his company oversees SPAAC deals and direct listings. It opted for the IPO route as it met the company’s goals of creating a broad base of shareholders while creating an opportunity for branding.
The cost of an IPO is comparable, he added to other exit options. Sprill also praised the IPO process, noting that its stringent requirements made DigitalOcean a better company.
Earlier in our conversation, I asked Spruill a question I had given every CEO on the day of the IPO: how do you feel? This is a bit much, but it sometimes draws insights from executives and founders who discuss the internal functioning of their companies after weeks, a rare personal question asked.
Sprill said he felt unconvinced and that no one could repeat the IPO because of so much work that went into building the company and its team. If you combine wins and losses over time, with the former compared to the latter, and can cross the finish line with the right matrix and market, you can be one of the “best investors” to be “grilled”. Can earn spots. They said.
Spurill said that these investors invested $ 750 million or so into his company. Funds that can use it to withdraw debt and free up more cash flow. Not a bad day, I would say.