2016 IPO Prospects: SurveyMonkey Will Likely Wait

Includes: IPO
by: Sramana Mitra

According to IBISWorld, the US market research industry experienced a slow but steady annual growth of 0.4% over the past five years to reach $20 billion in 2016. It expects growth to accelerate in the next five years, driven by changes in media consumption and the growing use of social media. SurveyMonkey is an IPO-ready player from the online survey software segment of this industry.

SurveyMonkey’s Offerings

Survey builder SurveyMonkey was founded by software developer Ryan Finley in 1999. For the first few years, Finley bootstrapped the company and ran a very tight ship. He hired the first employee only after three years of business. By 2008, they had reported revenues of $27 million with 14 employees. Today, SurveyMonkey is a leading survey tool that is used by about 33 million people and receives 90 million survey responses per month.

SurveyMonkey operates on a freemium pricing model. Users can sign up for free on SurveyMonkey to conduct online surveys with limited features. For a premium subscription, consumers can get advanced features that include unlimited questions and responses, enhanced security, customer support from SurveyMonkey, and integration with statistical software such as SPSS for further analysis of results. Its client list includes Facebook (NASDAQ:FB), Salesforce (NYSE:CRM), Samsung (OTC:SSNLF) and Virgin America (NASDAQ:VA) to name a few.

Outside its core offerings, SurveyMonkey is now focused on creating business-grade solutions for customers. To this end, they acquired the solution TechValidate in 2015 for an undisclosed sum. TechValidate converts the results into content and testimonials that customers can use for marketing, social media and case studies.

SurveyMonkey is also trying to leverage the data it collects. Its first data product was SurveyMonkey Audience, which allowed you to build a dataset based on a panel of respondents. Last year, it launched SurveyMonkey Benchmarks, which lets customers compare their survey data to others and gain a deeper understanding of their data.

SurveyMonkey has also launched a mobile apps analytics service called SurveyMonkey Intelligence to analyze an array of metrics such as usage, retention data, leaderboards, and audience demographics. The free version tracks basic download and usage metrics. Paid plans start at $79 per month and allow access to more comprehensive data. With this offering, SurveyMonkey will be competing against the likes of App Annie, Mixpanel, Appcelerator, Flurry, and SimilarWeb. Quite a crowd there!

SurveyMonkey’s Financials

In 2009, its revenue was $28 million in revenue and pretax earnings were $25 million. In 2012, revenues grew more than 40% over the year to $113 million and pretax earnings were $62 million. In 2016, it is expected to generate approximately $200 million in revenue with profit margins around 35%.

SurveyMonkey has raised $1.15 billion in three rounds of funding from investors including late CEO Dave Goldberg, Tiger Global Management, Google Capital, JPMorgan Chase, Bank of America, SunTrust Robinson Humphreys, Bain Capital, T Rowe Price, Social Capital, and Spectrum Equity Investors. In December 2014, they raised $250 million to fund acquisition in a round that valued them at $2 billion. An earlier round in January 2013 had valued them at $1.35 billion.

SurveyMonkey has seen a few management changes since the sudden demise of CEO Dave Goldberg in May 2015. Zander Lurie was the interim CEO before Bill Veghte was named the new CEO in August. However, after six months Veghte suddenly quit due to some differences with investors. Now, Lurie is back as the CEO.

SurveyMonkey has long been IPO ready but Goldberg was firm about keeping SurveyMonkey private. The current tech IPO climate seems to be quite depressed, and it is unlikely that they will go out until the market dynamics improve.