SendGrid raised $131 million in a successful IPO but the founders aren't the big financial winners
- SendGrid, the Denver-based startup responsible for sending 36 billion emails a month, completed a $131 million IPO on Wednesday.
- With that, SendGrid has become the first company out of TechStars to go public and the second IPO of a company backed by Dave McClure's 500 Startups accelerator seed fund.
- Only one of the three founders still had a big enough stake in SendGrid to be among the shareholders who own 5% or more of the company.
SendGrid is one of the big startup success stories from the tight-knit Denver/Boulder startup community and it stepped onto the public markets stage on Wednesday with a successful IPO.
SendGrid priced its shares at $16 each, above its original tentative range at $13.50 to $15.50 per share, raising $131 million for the company.
The stock opened at $18.55, briefly soared to $19 before settling in at just about $18 for most the day. All told, the stock popped nearly 14%. Better still, at $18 a share, the company's market cap is $725 million, a nice bump over its last valuation as a private company of $578 million, according to PitchBook, a database that tracks such things. SendGrid had previously raised about $194 million from private investors.
SendGrid is a hugely popular service that helps companies send emails for things like newsletters, rewards programs, confirmations on purchases, email marketing. It has 58,000 customers, including Spotify, Uber, Airbnb, and Staples, and sends a whopping 36 billion emails a month on behalf of them.
The company is not profitable but revenue is growing. SendGrid generated just over $80 million of revenue in the first nine months of 2017, compared to $57 million for the same period in 2016, a 41% increase. Net losses were $4.2 million for the 2017 period and $3.5 million for the period in 2016.
The tech industry was watching SendGrid's IPO for a few reasons. For one, SendGrid is the first company from the TechStars incubator program to graduate to an IPO. And it's one of only two companies that TechStars has invested in to IPO. The other was Twilio. SendGrid was also the second company backed by Dave McClure's 500 Startups fund to IPO, after Twilio. McClure never had a major role at SendGrid. He parted ways with 500 Startups earlier this year under allegations of sexual harassment.
Bounced back
SendGrid is also a company that bounced back from a very public sexual harassment controversy in a 2013 incident that will forever be known as Donglegate. That's when one of its female employees complained on Twitter of overhearing dongle jokes at a tech conference. As a result, the male developer she complained about got fired from his job. Vigilante defenders of him took down SendGrid in a denial of service attack and SendGrid fired the woman as well.
All of that is water under the bridge for the company and by 2017, SendGrid employed 408 employees, it says.
Its investor history, beyond TechStars and 500 startups is interesting too. One of its backers is an investor known as Highway 12 Ventures, a Boise-based VC that focused on Rocky Mountain region startups that basically closed shop in 2011 when it decided not to raise a third fund. Highway 12 and its affiliates own a about 11% of SendGrid. At $18 a share, that stake is worth $81 million.
On the other hand, two of the three cofounders no longer own as much as 5% of the company: Tim Jenkins, and Jose Lopez. Both are still listed on the company's website as engineers who work there. The biggest winner in this IPO among the three cofounders is Isaac Saldana. He still owns 4% of the company and, at $18, his stake is worth $33 million.
The biggest winner of them all though is Brad Feld's Foundry Group. Foundry is the big venture capitalist outfit in the Boulder area. It owns 23% of SendGrid worth nearly $177 million as of this IPO at $18 a share.
The Foundry partner involved with SendGrid wasn't Feld, though, it was Ryan McIntyre. He was best known for co-founding an internet bubble era success company known as Excite, and backing Postini (acquired by Google) and Sling Media (bought by dish) at his previous venture firm.
This IPO should help Colorado's small startup community gain momentum if those who reaped from it become angels to others there. Although Denver and Boulder have a reputation as a good place to grow a startup, the truth is, very few of these startups have matured to the point of becoming a public company. And that means the region's reputation as a startup hub hasn't matched up to reality for some who have tried, as Wired reported a few months ago.
The most recent examples of Colorado public companies include cable provider WideOpenWest that went public earlier this year; Rally Software back in 2013 (later bought by CA); and Zayo Group in 2014. Earlier this month, HomeAdvisor became a public company in a backwards way, by acquiring the publicly traded Angie's List and listing the combined company, ANGI Homeservices on the Nasdaq.