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Published 17 April 2014 10:33, Updated 22 April 2014 11:50
Ben Richardson, left, and Dave Greiner of Campaign Monitor have attracted close to $270 million in US investment, a figure believed to be the largest ever for an Australian technology start-up. Photo: Nic Walker
Facebook founder Mark Zuckerberg once declared email was dead, but Sydney duo Dave Greiner and Ben Richardson, both 35, beg to differ. Email is alive, kicking and has just netted them the largest-ever investment in an Australian technology start-up.
A group of United States venture capital firms, led by New York-based Insight Venture Partners, will pour $US250 million ($266 million) into Campaign Monitor, an email marketing service used by 100,000 companies, including Apple and Facebook.
It is the first-ever external funding for Campaign Monitor, a 10-year-old company with no sales people and a single office with 40 people in the beachside area of Sutherland Shire, in Sydney.
“We’re absolutely proud of our boot-strapped heritage and where it’s gotten us to date, but to go from 65 people to 165 people, and to triple or quadruple the business and continue to grow our revenues, that’s a different skill set,” co-founder Mr Greiner told AFR Weekend.
Tony Faure, a technology investor and chairman of start-up incubator Pollenizer said it was a “good sign American firms are taking us seriously”.
“The big funds are much more interested in Australia now than they would have been two or three years ago.”
Neither Campaign Monitor or Insight Venture Partners would reveal what equity stake the investment would buy, or its implied valuation. However, industry sources with knowledge said the funding round puts the company at about $600 million.
Combined with $US160 million the company is raising on US debt markets, Campaign Monitor appears to be amassing a war chest that could be used for significant expansion into the US and Europe, as well as acquisitions.
A core competitor, Exact Target, was acquired by cloud computing software maker Salesforce.com for $US2.5 billion last year.
Insight Venture Partners managing director Deven Parekh said the firm would help establish a sales team in the US, where 40 per cent of the company’s sales come from, to grow the business.
“They’re already international, it’s more just a question of building out a team in North America and building out a sales and marketing function.”
An early investor in Twitter, the New York venture and private equity firm has previously invested in Australian companies Hitwise, which was acquired in 2007, as well as online shopping club OzSale and educational software maker 3P Learning.
Mr Parekh, alongside firm partners Nikitas Koutoupes and Daniel May will join Campaign Monitor’s board as part of the transaction.
It is understood several major US firms, including iSelect backer Spectrum Equity, Accel Partners and Technology Crossover Ventures were vying to invest, alongside Melbourne-based Square Peg Capital.
Goldman Sachs, PwC and Herbert Smith Freehills advised Campaign Monitor on the investment.
“There’s a tremendous amount of interest in [Campaign Monitor]; US and foreign investors are comfortable with making investments in Australia,” Mr Parekh said.
Mr Greiner and Mr Richardson, friends since they were five, initially started a web design consultancy while studying technology at the University of Wollongong.
Faced with mounting requests to handle email marketing campaigns for the small businesses, the duo developed their own online service allowing businesses to design and send out their own marketing emails en masse at 1¢ a message. Since 2004, with price unchanged, the service has been quickly adopted by the creative and marketing departments of some of the world’s largest companies, often without knowledge of higher-ups at those companies.
Campaign Monitor bucks the trend of high-growth technology companies that typically focus on product before revenue or profits.
Mr Greiner and Mr Richardson claim they’ve been profitable from day one, with double-digit earnings growth.
Though Campaign Monitor will not disclose the company’s financial performance, an advisory issued by Standard & Poors on Wednesday indicated it would raise $US160 million from the US loan market, taking it debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio to 4.7 times. This suggests the company has earnings of about $US34 million.
S&P said the company would likely continue to have strong EBITDA margins of 50 per cent in coming years.
“We’ve always had significantly high margins, much higher than our peers. But we’ve always been a big fan of running a profitable business . . . we’ve been pretty conservative on that front. Our margins will be dropping over the coming years as we invest in a little bit of sales and marketing but we absolutely plan on remaining a pretty profitable business,” Mr Greiner said
Atlassian co-founder Mike Cannon-Brookes, a mentor to Mr Greiner and Mr Richardson, said the investment was a validation of their business.
“They’ve built a pretty phenomenal company to be able to get a $250 million seed round. Anyone who decides to build a half-billion-dollar tech company from the Shire has to be thinking their own way.”
Mr Greiner said the pair, who have never had official titles beyond co-founder, would retain a significant ownership stake.
“Five years ago I would have thought if something like this happened, ‘Great, go live on a beach’. But I realise now that that’s bullshit. You need to have a balance between time with people you love and care about outside of work but, us personally, I know I need something I’m passionate about that I can sink my teeth into.”