On Thursday night, at a StrictlyVC event at SurveyMonkey in Palo Alto, this editor sat down with CEO Zander Lurie to learn more about the direction of the 17-year-old company, known for the roughly 90 million surveys that the outfit and its customers create for their various constituents each month (and whose average order volume is $300, says Lurie).
I was particularly interested in Lurie, a former GoPro, CBS, and CNET executive, given his relatively quiet tenure as chief executive — a role he accepted in January after the passing of longtime CEO Dave Goldberg last year (and following a brief stint by a more immediate precedessor, tech veteran Ben Veghte).
We wound up chatting about the company’s valuation, polling accuracy, and whether and when the company will go public, among other things. Part of that chat, edited for length, follows.
You’ve been a CEO for nine months. What do you now appreciate much more about every CEO you’ve ever known?
I always had a boss or somebody who was there for constant feedback, and it’s different when you’re CEO. We have an amazing board of directors . . . but as CEO, you’re in charge of the script: What’s the strategy, who are the teams you’re entrusting to build the company, then all the comms and the motivation and accountability associated with delivering on the company’s promise. It’s on you to be that great storyteller. And I love it, but that’s what has struck out for me. There’s no one to ask: Am I doing a good job?
You inherited a unicorn company – valued at $2 billion at its last financing in late 2014. You also inherited the company under unique circumstances. Do you feel extra pressure owing to those circumstances?
We’re fortunate to have one of the most profitable businesses on the internet. You couldn’t really do a survey until SurveyMonkey and its founder really invented this new online survey platform. The company in 2009 had about 12 employees and $25 million in profits, then beloved Dave Goldberg became CEO in a buyout and in six years hired about 600 people, and today we’ll do about $200 million in revenue, with EBITDA margins in the mid 30s. So sure, the circumstances under which I became CEO were awful. Dave was one of my best friends in the whole world. But the culture he built, and his ability to recruit a team of world-class people across product and engineering and marketing, amazes me still. So while it’s a lot of pressure, it’s also super fun and a great honor.
How many people are using your surveys?
There are 15 million who are sending [surveys] on an annual basis and interacting with our products in different ways. The vast majority are responding to surveys from people they trust, increasingly on a mobile device.
We have a very detailed cohort analysis whereby people who try [the service] on a monthly basis tend to come on a somewhat transactional basis, and those who sign up for an annual plan — the longer they stay, the less likely they are to churn, and those are obviously our most profitable companies.
Uber is one of your many corporate customers, correct? Are they responsible for those five-star ratings we’re asked to give drivers at the end of each ride?
Uber is using a variety of [our] products, though I can’t say exactly which. I think the largest survey company in the world today is Uber. Today, every time you take an Uber, you take a .2-second survey where you’re rating your driver, and obviously those data points are helping inform them about which drivers are doing a great job, as well as [informing Uber about] the customers who drivers like. It’s using what we call people-powered data in a really refreshing way to drive their product forward.
I always give drivers five stars out of some paranoid fear that if I don’t, there will be ramifications. Other people game surveys for their own reasons. How do you ensure these surveys are actually useful to your customers?
Survata is a three-year-old, 10-person, San Francisco-based startup that creates consumer surveys for ad agencies, hedge funds, consumer packaged goods companies, and many others that are looking for feedback about their offerings. If Chipotle is thinking of introducing a new salsa concept, for example, Survata — which works with a network of publishers, from blogs to online magazines to video sites — will create a survey that targets the demographic from which Chipotle wants to learn.
It’s easy to appreciate the company’s appeal. It’s a channel for consumers to access content for free. (Publishers ask readers to complete surveys to readers in lieu of paying.) It’s a cheaper, faster alternative to traditional research. To wit, Survata charges a flat rate of $1 dollar per survey response, in contrast with a company like Nielsen, whose starting costs can be around $30,000. Survata’s surveys also represent a new revenue stream for its publishing partners. Say Chipotle – a real customer – wants 500 responses about that new salsa. Survata shares the $500 it’s paid by Chipotle with its publishers.
Despite heavyweight competition from the likes of SurveyMonkey and Qualtrics, among others, investors apparently like the traction it’s gaining. This morning, the company is announcing $6 million in Series A funding led by IDG Ventures, with participation from Bloomberg Beta and numerous angel investors, including Alexis Ohanian and Garry Tan. The company — a Y Combinator alum – has now raised $8.1 million altogether, including from earlier backers SoftTech VC and PivotNorth.
To learn more about Survata and how it helps it clients (including VCs), we talked Friday with CEO Chris Kelly. Our chat, right here, has been edited for length.
Bill McGlashan would like you to know something. TPG Growth is no newcomer to startups. The 45-person group that McGlashan leads within 22-year-old TPG Capital hasn’t just been writing checks to startups since 1999, but it has incubated a number of companies, too (including, last year, the film studio STX Entertainment). “I think there’s been a lot of noise lately about PE getting into growth investments, which is a function of absolute check sizes getting so large . . .. but [investing in privately held companies] is part of what we do and have done for a very long time. This isn’t private equity now doing growth. This is what we’ve always done.”
We talked Wednesday with McGlashan about how TPG Growth works, why the typically private firm is talking with the press suddenly, and how it plans to invest the giant, $3 billion fund it announced earlier this week. Our chat has been edited for length.
How old is TPG Growth, how many funds has it raised, and how does it differentiate itself from the broader company?
We raised a $500 million venture fund in 1999. It was one of the largest-ever first time funds and the team went happily off to do VC, which seemed like a good idea in 1999. In 2000, which is when the fund actually closed, things were obviously challenging from a macro perspective. So I came aboard in 2003 to rethink the strategy. With the second half of that fund, we took a different approach [that was more integrated with the rest of the firm], and we’ve maintained it through three subsequent growth funds.
[Ed: Those are a $1.2 billion fund, which McGlashan says has “about a 25 percent” gross IRR and “19 percent net IRR”; a second, $2 billion fund that he says has a 60 percent gross IRR and net IRR of 40 percent, and the firm’s newest, $3 billion fund.]
What’s your overarching approach?
We want to do investments where our $67 billion platform can be a uniquely compelling partner in delivering growth, and that can mean different things depending on the industry and stage of the business and the nature of the company . . . so we’re agnostic about sectors and geographies. The problem with consumer funds or geography-specific funds is that everything a hammer sees is a nail, and we couldn’t do what we do if we had hammer/nail syndrome.
How many companies a year do you fund, and who works in your group? Can you describe the hierarchy for us?
We [typically fund] 10 or 15 companies a year where we can [accelerate the business]… There are nine partners in the group and each [focuses on] a combination of sector and geography. We also have a range of senior advisors that can be deeply involved. Then we have principals, VPs, associates, [as well as access to a] whole, 90-person operating team [at TPG], whose head of human capital [Fred Paulenich] was [senior VP of HR] at Walmart and Levi Strauss [previously].
So when we go into a company like [famed guitar maker] Fender [in which TPG Growth took a majority stake in early 2013], we’re fixing the core business, including improving the sales organization, but we’re also embarking on a digital strategy, thinking of e-learning and collaboration, and focusing on direct-to-consumer engagement. Even though it’s a $700 million revenue business, it doesn’t have leadership that could go on this journey alone, so we can plug in people who can accelerate that change, and we do the same with all our companies.
Who makes the ultimate decisions on these investments?
There about about 30 partners across TPG and 8 managing partners [and from that group] there’s an investment committee [that includes members of TPG Growth]. We don’t have several wizards who are pushing a red or green button. [Firm cofounders David] Bonderman and [James] Coulter and other senior partners are [involved in all the] decisions. It’s important because if you’re an entrepreneur and we’re investing $50 million, we want you to know the firm cares as much about your company as it does with a $1 billion investment.
How long does it take for a yes or no?
We don’t make bets, write a check and hope it all works out. We’re signing up for being held accountable as a partner who will deliver value, and that takes real time. There are [some deals] when we move quickly and get deals done in a month. Sometimes, we spend six months getting to know each other. Time isn’t usually the gating issue. We do real work. It can’t happen with a tummy rub.
You have investments all over the map. Do you have any idea where in the world you’ll be committing this new capital?
[Our first growth fund] was 60 percent developed world, 40 percent emerging market. Our last fund was more like 80/20. Rough justice, [our new fund will be] 70/30, but we’re careful not to settle on allocation targets. We’re truly global, with investments in Brazil, Indonesia, Africa, Turkey, China; we have a tower company in Myanmar that’s growing like a weed.
Some of those places are obviously frothier than others. China, for example, seems dangerous from this distance.
We’ve not invested in China in the last three years because we felt valuations were very challenging with all these R&D funds and local funds and angels and super angels. We just felt that valuations, married to the fundamental risks in that market, didn’t make sense. But we did just approve our first deal recently; we’ve found that there’s been a valuation reset in certain sectors.
What about private company valuations here in the U.S.? Plenty of people have grown concerned about those, too, particularly given how few companies are going public.
Overall, what entrepreneurs have been able to do is trade an IPO for private financing, and that offers real advantages to building these businesses. I don’t think that’s going away, by the way. I think that public-private confluence we’re seeing is probably here to stay.
As for valuations, some of these are great companies, like [our portfolio companies] Airbnb, Uber, Domo, and SurveyMonkey, which we recently exited. There are others – you can imagine that we’ve seen them all – that we’ve passed on.
You sold your stake in SurveyMonkey? Are you doing much secondary selling? Have you sold any of your shares in Uber or Airbnb?
It’s a deal-by-deal, case-by-case basis. Honestly, with SurveyMonkey, it wasn’t a case of the company not doing well. It was their strategy to do a series of refinancings and there was tremendous interest because the company is so [fast-growing] and fundamentally profitable that they can generate strong, ongoing yield for new investors. We weren’t looking for a 25 percent annual return.
We have not sold Airbnb or Uber. The fundamental growth in those businesses is incredible.