Well, that didn’t take long. Less than three years after its IPO, events marketing firm Cvent has become the latest tech company to go private.
It’s not exactly a unicorn-gets-killed story, but it’s pretty close, and another chapter in the long-and-wild ride that is its founding CEO,‘s career.
On Monday, Cvent’s management announced that Vista Equity Partners bought the company for $32/share or $1.65 billion. That’s an almost 70% premium over the share price on April 15, and over the past 30 trading days.
When the company went public in 2013, it had all the earmarks of an IPO success story.
The company priced its 5.6 million shares at $22, well above the initial range of $17-$19. Shares immediately popped by another $13. Revenue was climbing at the company and the previous year, 2012, it had swung to a $4.3 million profit, compared to a loss of $0.2 million in 2011.
The stock ticked along hitting a high above $43 in 2014 but cooled, trading at slightly above IPO price for much of 2015 and climbing to above $36 by the end of the year.
And then in 2015, signs began to appear that it wasn’t going to be a hyper-growth company. The company divested its consumer ticketing business. Aggarwal warned analysts on the quarterly conference that the recent history of beating Wall Street financial targets was coming to an end and that “we don’t expect to be able match that performance in 2016.”
In 2016, the stock fell out of favour and plummeted to the low $20s until Cvent opted to bag the public thing altogether, leaving the public markets at just about the same valuation as it entered it.
It almost died once before
Cvent offers offers a cloud app that helps companies organise and manage their events, everything from online registration to processing payments.
It was founded in 1999, during the wild ride of the last tech bubble, with investors whispering in Aggarwal’s ear to spend, spend, spend and grow, grow, grow, he told Business Insider in 2012,
Then the internet bubble popped and Aggarwal found himself with 125 employees, out-of-control monthly bills, and only $1.5 million in annual revenue. He had just signed a five-year lease on an office space to house 250 employees thinking the investment money would go on. But after the market took a nose dive, he didn’t have the cash to pay for it.
“We only had about $380,000 in the bank, which sounds like a lot, but not when you’re burning a million a month,”
“We only had about $380,000 in the bank, which sounds like a lot, but not when you’re burning a million a month.”
he told us in 2012 He renegotiated the lease, gave up his salary and was forced to move back in with his parents, at age 33.
“I’m going to take 100% of the blame because I’m CEO — but trust me, all of them [our investors] were encouraging us to do that, including our board. You know, grow, grow, grow, grow, grow,” Aggarwal told Business Insider in 2012, when his company was genuinely growing again. He said he had learned his lesson and became tightly focused on cost control after that.
And he scraped his company from the brink of bankruptcy into one that finished 2015 with $187.7 million in revenue, but that was heavily spending on sales and marketing and had swung to a loss again, with an operating loss of $16.50 million.
As for the focus on growth that got him into trouble in 2000, it sounds eerily familiar.
That’s the same message investors were giving startups during 2015’s “unicornapoolza”, where startups without much revenue were landing millions in investment at huge, billion-dollar valuations. Investors encouraged these young companies to spend their cash to grow, the idea being that cash flow and profits would arrive after they hit a certain size.
In the meantime, some tech leaders are insisting that highly valued startups should step up and go public.
But should they? Now, we’re seeing an increasing number of tech companies leaving the public markets including BMC Software, Compuware, Dell, Riverbed, Informatica, Tibco and now Cvent.