Squarespace CEO value $ 2.Four billion following the online firm’s NYSE debut

The New York Stock Exchange welcomes Squarespace, Inc. (NYSE: SQSP) to celebrate its direct listing on May 19, 2021.

NYSE

By 2010, Anthony Casalena spent seven years bringing his startup Squarespace, which he grew from a dormitory project at the University of Maryland to a $ 10 million company, to its knees.

Then Getty Images approached him to see if he wanted to sell.

Casalena thought the offer was long and tough, but he didn’t want to give up control. Instead, he chose to remain independent and attract outside investors for the first time to accelerate hiring and product development, and also sell some of his shares.

He didn’t know then, but when Casalena raised a $ 38.5 million financing round, he made a billion dollar decision for himself and an extremely lucrative one for venture firms Index Ventures and Accel Partners.

Squarespace, which sells tools for easily building and publishing websites, was featured on the New York Stock Exchange on Wednesday with a market value of $ 6.6 billion. Casalena, the company’s largest stakeholder, has stocks valued at $ 2.4 billion, while Index and Accel control stocks are valued at $ 944 million and $ 750 million, respectively.

Because Squarespace went public through a direct listing rather than raising capital through an IPO, Insiders can start selling immediately instead of waiting for the lock to expire. The stakes listed above include some sales that they immediately registered for trading, including 6.2 million registered by Casalena.

“A direct listing suits us because Squarespace has been a profitable company for several years and we don’t have to raise any money at this event,” Casalena told CNBC’s “Squawk Box” on Wednesday. “Our idea was to follow direct listing, giving people the ability to buy when they want to buy, sell when they want to sell. What is great about direct listing is that it doesn’t get unnecessarily watered down today . “

Squarespace had a tough debut, opening at $ 48 below its reference price of $ 50 on the NYSE. In March, the company raised a private round at $ 68.42 per share and valued the deal at $ 10 billion. Stocks were largely down on Wednesday, and cloud software stocks performed poorly this year as investors rotated out of risk.

At 38, Casalena is the youngest tech entrepreneur to join the billionaire ranks as high-growth companies that have filled the IPO pipeline in recent years have hit the market with high valuations. The founders of Affirm, Roblox, Coinbase, Bumble, UiPath, and AppLovin all joined the three-point club this year.

Squarespace competes most directly with companies like Wix, WordPress from Automattic, Weebly from Square, and Shopify. The company has 3.7 million subscribers.

Revenue rose 28% last year to $ 621.1 million. Net income declined to $ 30.6 million from $ 58.2 million a year ago as the company increased sales and marketing expenses by 40%, “given the accelerating development of time and money consumed by consumers the COVID-19 pandemic online. “Squarespace said in its prospectus.

From college to CEO

The Squarespace story began in 2003 in a student housing complex called South Campus Commons in College Park, Maryland. During his school days, Casalena looked for a website that would allow easy online publishing but found the existing services such as blogger inadequate. He coded his own together and soon found that someone wanted to pay him for it.

“The blog was the anchor, but it was always about getting more out of it,” Casalena told the NPR podcast “How I built that with Guy Raz” in 2019.

Casalena eventually persuaded his father to give him $ 30,000 so he could buy a couple of servers and put them in a data center in New York. After college, he drove to Manhattan and settled in a fourth-floor walk-in apartment he’d found on Craigslist.

For the next several years, Squarespace grew steadily with a skeleton crew and little structure. In 2007 Casalena began to professionalize the operation and even hired a more experienced manager as CEO. He realized that this approach would not work.

“I’ve learned a lot of lessons the hard way by literally making pretty much every possible mistake that can be made,” Casalena told Raz. “I didn’t know what I was getting myself into.”

In the meantime, Accel had been watching Casalena closely. The company best known for its early betting on Facebook had started looking for internet and software companies around the world that were growing significantly without risk funding. Someday, Accel thought, these founders may want to raise money to make an acquisition or seek funding to hire more expensive talent.

“In situations like this, we want to do our best to develop a relationship and try to be there when they may develop their thinking,” said Andrew Braccia, the Accel partner who ultimately led the Squarespace investment, in an interview .

Accel took a similar approach to investing in Atlassian, an Australian software company whose products were popular with developers, and Qualtrics, a family-run cloud software company in Utah. Atlassian now has a market cap of $ 54 billion, and Qualtrics was acquired by SAP for $ 8 billion in 2018 before spinning off to a publicly traded company valued at $ 17 billion earlier this year.

A decade ago, Accel’s growth investment strategy was just a thesis, but Braccia said it was now clear that “you can get venture-style returns from later bootstrap companies.”

Braccia, who lives in Silicon Valley, flew to Casalena in 2010. He and partner Ryan Sweeney had breakfast with the Squarespace founder in downtown Mercer Kitchen, then spent a few hours in the Squarespace office, where Casalena guided them through his vision for the next iteration of the company’s publishing system.

“I remember Anthony guiding us through the new version of his product,” said Braccia. “He was incredibly focused on the smallest details.”

A happy breakout

Around the same time, in July 2010, Index’s Dominique Vidal was in New York to meet Casalena. Introduced by Jonathan Klein, then CEO of Getty, he flew in from London to try to land the deal. Vidal, who had been friends with Braccia since his time at Yahoo, was stuck in New York for much longer than expected due to the volcanic eruption in Iceland that released ash across much of Europe and disrupted international travel.

Vidal wasn’t available for an interview, but Nina Achadjian, another partner at Index, passed the story on to CNBC on his behalf.

“Dom’s flight was canceled and he was hanging out with Anthony a ton more,” said Achadjian. “The more time he spent with Anthony, the more he got blown away.”

Casalena told Raz on his podcast that he wasn’t sure how Index and Accel heard Getty made an offer, but somehow “they got wind of it,” he said. They had a counter-proposal for him.

They said, “You don’t have to do that. You don’t have to sell everything if you want some liquidity,” Casalena told Raz. “Why aren’t you accepting an investment from us? We’re going to put some money into the company. You can sell some of your stock to us. You can keep it going. We’re going to set up a board, we’re going to help you recruit executives and all.” continue. I liked that. “

Vidal and Klein joined the board along with Braccia. Casalena was reappointed CEO.

Squarespace raised another $ 40 million in 2014 in a round led by General Atlantic, now the largest outside investor with a $ 1.3 billion stake. The company raised $ 200 million in 2017 on a valuation of $ 1.7 billion and $ 300 million in March prior to direct listing.

The New York Stock Exchange welcomes Squarespace, Inc. (NYSE: SQSP) to celebrate its direct listing on May 19, 2021.

NYSE

Casalena waited long enough to raise its first debt and held a larger stake than many venture-backed company founders.

He also has oversized control over decision-making. Squarespace has a dual-class voting structure, and Casalena owns most of the Class B shares, giving it control of approximately 68% of the total voting rights.

While this structure has become common among founder-run companies in Silicon Valley, critics say it creates poor accountability systems and limits the ability of the board of directors and shareholders to take action when needed.

IPO research firm New Constructs said in a report this week that corporate structure is one of the reasons investors should be cautious. The company said Squarespace was “worth $ 4.2 billion at best,” in part because it operates in a highly competitive market with cheaper alternatives.

Consolidating power does not help.

“One risk of investing in Squarespace’s direct listing and other recent IPOs is the fact that the stocks sold have little or no say in how the company operates,” the company wrote.

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